Up the Ante on Energy With These Four Leveraged ETFs

Oil prices retreated recently as traders are eagerly anticipating the release of inventory data. In the meantime, playing the energy sector with leveraged exchange-traded products (ETPs) will once again see the majority of activity in oil.

The U.S.-China trade deal standoff has investors fretting as of late, but oil and gas operators have no reason for pessimism despite these trade deal woes. According to a study by L.E.K. Consulting, oil and gas operators are feeling optimistic when it comes to the commodity for the rest of 2019.

In particular, operators are liking what they see in terms of commodity prices, capital investment and development costs. While the $100 per barrel price target that some analysts saw in 2018 appears a bit far-fetched now, a $65-$75 per barrel price range is a bit more realistic after a flattening of prices within the $55 to $60 range, according to the study.

Ultimately, however, it will be the Organization of Petroleum Exporting Countries (OPEC) to decide on what oil prices will do in terms of a production cut that could keep oil prices skying higher.

“The bottom line is that none of us wants to see the stocks swell again, so we have to be cautious. It is one of our most critical priorities,” Saudi Energy Minister Khalid al-Falih said at a panel OPEC/non-OPEC ministerial meeting this weekend.

“The Saudis seem keen to extend the production cut deal into the second half of this year, in order to “gently” draw down inventories,” Warren Patterson, Head of Commodities Strategy at ING, said on Monday.

Leveraged ETF plays in the energy sector:

  1. UBS ETRACS ProShares Dly 3x Lng Crud ETN (NYSEArca: WTIU): With WTIU, the 3X long securities provide a daily long leveraged exposure to the performance of the Bloomberg WTI Crude Oil Subindex ERSM. The index is designed to measure the return from a rolling long position in WTI crude oil futures contracts that trade on major U.S. exchanges.
  2. VelocityShares 3x Lng Crude Oil ETN New (NYSEArca: UWT): UWT seeks to replicate three times of the S&P GSCI® Crude Oil Index ER. The index tracks a hypothetical position in the nearest-to-expiration NYMEX light sweet crude oil futures contract, which is rolled each month into the futures contract expiring in the next month. The value of the index fluctuates with changes in the price of the relevant NYMEX light sweet crude oil futures contracts.
  3. ProShares UltraPro 3x Crude Oil ETF (NYSEArca: OILU): OILU seeks to return a multiple (3x) of the performance of the Bloomberg WTI Crude Oil Subindex for a single day. The fund seeks to meet its investment objective by investing, under normal market conditions, in futures contracts for WTI sweet, light crude oil listed on the NYMEX, ICE Futures U.S. or other U.S. exchanges and listed options on such contracts.
  4. United States 3x Oil Fund (NYSEArca: USOU): USOU seeks the daily changes in percentage terms of its shares’ per share NAV to reflect three times the daily change in percentage terms of the price of a specified short-term futures contract on light, sweet crude oil. USCF will endeavor to have the notional value of the fund’s aggregate exposure to the Benchmark Oil Futures Contract at the close of each trading day approximately equal to 300% of the fund’s NAV. The Benchmark Oil Futures Contract is the futures contract on light, sweet crude oil as traded on the NYMEX, traded under the trading symbol “CL.”

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