The United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, was mostly flat on Monday, but the widely followed oil exchange traded product closed July on a strong note with a gain of about 9% over just the past week.
However, the Organization of Petroleum Exporting Countries continues looming large when it comes to oil prices and some commodities market observers believe the cartel could actually hamper crude’s recent ascent. Those concerns come as professional traders are growing bullish on crude while trimming bearish positions in oil futures contracts.
“Analysts cut yet again—for a sixth consecutive month—their oil price forecasts for 2017 and 2018, as the slower-than-expected rate of oil market rebalancing puts an increasing amount of pressure on OPEC’s resolve to stick with the cuts, according to 33 economists and analysts surveyed in the July Reuters poll,” reports OilPrice.com.
Looking ahead as we head toward the height of summer driving, U.S. demand may also help support pricing, especially given the recent selloff. Investors seeking an alternative asset to traditional stocks and bonds may consider commodities like oil during the traditional summer doldrums.
Related: A Commodities Call for the Remainder of 2017
Investors interested in gaining exposure to the crude oil market can take a look at the recently launched ETFS Bloomberg Energy Commodity Longer Dated Strategy K-1 Free ETF (NYSEArca: BEF). BEF tries to provide long-term capital appreciation designed to exceed the performance of the Bloomberg Energy Index 3 Month Forward Index, which tracks movements in the prices of rolling positions in a basket of energy commodity futures with a maturity between 4 and 6 months.
“Earlier this month, the International Energy Agency (IEA) said that the rebalancing was taking too long, and that compliance among OPEC members slipped in June to its lowest level—78 percent—since the start of the deal, as not only exempt Libya and Nigeria pumped more, but also Saudi Arabia. Although OPEC’s biggest producer stayed within the limits, according to OPEC’s secondary sources, it did not overcomply with its share of the cuts as much as it had done in previous months,” according to OilPrice.com.
While U.S. shale producers previously continued pumping in the face of low prices, the industry has recently revealed a spate of capital spending reductions, indicating still low crude prices are taking a toll. Low oil prices are also prompting speculation about credit downgrades for some exploration and production firms that already carry junk credit ratings.
For more information on the crude oil market, visit our oil category.