Oil traders have been surfing a wave of volatility this year. Whether they were on the wrong or right side of the trade is another story. Looking ahead to 2021, traders will once again have both bullish options with the Direxion Daily S&P Oil & Gas Exp. & Prod. Bull 2X Shares (GUSH), or bearish choices with the Direxion Daily S&P Oil & Gas Exploration & Production Br 3X ETF (DRIP).
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.
On the flip side, DRIP seeks daily investment results that equal 200% 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).
Fear of weaker demand brought on by the pandemic certainly put a hurt on oil prices this year. However, like equities, prices have been on the move up as a vaccine rally is permeates the oil market. Can it last?
OPEC also plays a major roles in prices. Per a CNBC report, “Saudi Arabia called on fellow OPEC+ members to be flexible in responding to oil market needs as it builds the case for a tighter production policy in 2021.”
“OPEC+, which groups the Organization of the Petroleum Exporting Countries (OPEC), Russia and others, lowered its outlook on oil demand growth for 2021, according to a confidential document seen by Reuters,” the article added. “An option gaining support among OPEC+ nations is to keep the existing cuts of 7.7 million barrels per day (bpd) for a further three to six months, sources said, rather than tapering the reduction to 5.7 million bpd in January.”
“It’s widely expected OPEC+ will push back on plans to increase production … in January but with the Pfizer and Moderna announcements pushing oil back above $40, there may not be the same support there as there was just over two weeks ago,” said Craig Erlam, senior analyst at OANDA.
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