Crude Oil Continues To Crater As Short Crude ETFs Gain | ETF Trends

Crude oil markets continue to witness their worst crash in years, as markets are rapidly approaching $20 a barrel in West Texas Intermediate crude, with predictions of as low as $10 a barrel to come.

Saudi Arabia and Russia are still locked in a price war, which is drastically affecting markets, amid already tender stocks in the wake of the coronavirus panic. Russia refused to cut production, in an effort to suffocate America’s high-cost shale producers with cheap crude oil. Saudi Arabia responded by slashing prices and elevating production in what is precisely the opposite of what is needed to balance the market, as oversupply is now rampant.

“With each day there seems to be yet another trapdoor lying beneath oil prices,” Louise Dickson, an analyst at Rystad Energy, wrote in an emailed comment. “What we are seeing here is essentially the atomic bomb equivalent in the oil markets.”

As travel restrictions and quarantines continue to ramp up, energy analysts are hustling to curtail their oil demand forecasts.
Goldman Sachs now anticipates 2020 oil demand to diminish by 1.1 million barrels per day, notching a low in March when demand could plummet by 8 million barrels.
Norwegian-based Rystad Energy is even more bearish, prognosticating a plunge of 2.8 million barrels per day in 2020, nearly a fourfold increase from the energy firm’s most recent call for a decline of just 600,000 barrels per day. April demand is set to plummet by 11 million barrels per day, Rystad said.
The biggest barrier to higher prices is currently jet fuel, as airlines around the world are canceling flights and due to tightening travel restrictions. Worldwide commercial air traffic will fall by about 20% this year, Rystad predicted.
All these restrictions could continue to the rampant selling in oil, slingshotting the market toward $20 or even $10 a barrel, according to some analysts.
Goldman Sachs warned Tuesday evening of an “inevitable fall” in US oil prices to around $20 a barrel during the second quarter. That’s well below the Wall Street bank’s previous call for $29 oil, which is already old news, as oil currently trades below $21 a barrel as stocks tank.

“Crude has become a bigger problem for markets than the coronavirus,” Adam Crisafulli, founder of Vital Knowledge, said earlier this month. “It will be virtually impossible for the [S&P 500] to sustainably bounce if Brent continues to crater,” he added.

So which ETFs stand to gain as oil continues to fall? The ProShares UltraShort Bloomberg Crude Oil ETF (SCO), the DB Crude Oil Double Short ETN (DTO), and the ProShares Daily 3x Inverse Crude ETN (DNO) are all funds that allow investors to play the downside of the oil market. Year-to-date, SCO has gained almost 174%, up 11.6% just Tuesday.

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