After falling below $0 during the month of April, oil prices certainly want to forget the year 2020. While oil has come back from the depths of $0, one market expert says it could stay within the $40 range for the next two years.
“It’s hard for me to see oil prices getting out of the $40s for about two years,” David Bledsoe, president of Henry Resources, told the Reporter-Telegram by email. “When the world has 8 million barrels – mainly from OPEC – off the market, it seems impossible for oil prices to improve until demand recovers and all of the excess capacity is taken.”
Per the report, Bledsoe noted that “any recent strength in natural gas prices was little noticed by his company. He explained that gas revenues make such a small part of the company’s revenues, and most of Henry’s gas is sold at Waha pricing of $1.50 per Mcf rather than Henry Hub pricing of $2.50 per Mcf. Additionally, he said, most of the revenues from the company’s gas stream comes from natural gas liquids, which are ratioed to oil prices.”
The report went on to mention that Leslie Beyer, president of the Petroleum Equipment and Services Association, said that oil prices stabilizing “is a positive sign of economic recovery. It means people are returning to work and helps companies restart production to fuel that recovery. It’s also important to acknowledge the uncertainty underlying the economic recovery as we work toward containing the pandemic, but demand for the safe and efficient production of oil and gas will definitely return.”
Trading Oil Trends
Short-term traders betting on even more price increases can look to ETFs like Direxion Daily S&P Oil & Gas Exp. & Prod. Bull 2X Shares (NYSEArca: GUSH). GUSH seeks daily investment results, of 200% of the daily performance of the S&P Oil & Gas Exploration & Production Select Industry Index.
The fund, under normal circumstances, invests at least 80% of its net assets (plus borrowing for investment purposes) in financial instruments and securities of the index, ETFs that track the index and other financial instruments that provide daily leveraged exposure to the index or ETFs that track the index. The index is designed to measure the performance of a sub-industry or group of sub-industries determined based on the Global Industry Classification Standards.
On the bearish side of the trade, there’s the Direxion Daily S&P Oil & Gas Exploration & Production Br 3X ETF (NYSEArca: DRIP). DRIP seeks daily investment results that equal 300% of the inverse of the daily performance of the S&P Oil & Gas Exploration & Production Select Industry Index, which is designed to measure the performance of a sub-industry or group of sub-industries determined based on the Global Industry Classification Standards (GICS).
For more market trends, visit ETF Trends.