Right now, a confluence of harsh weather, geopolitical events, and OPEC supply cuts are continuing to move in favor of higher oil prices.
Up over 40% in the past few months, DBO seeks to track the DBIQ Optimum Yield Crude Oil Index Excess Return (DBIQ-OY CL ER), which is intended to reflect the changes in market value of crude oil. The single index Commodity consists of Light, Sweet Crude Oil (WTI). The fund invests in futures contracts in an attempt to track its corresponding index.
The broader energy play, DBE, is up 34% and seeks to track the DBIQ Optimum Yield Energy Index Excess Return, which is intended to reflect the changes in market value of the energy sector. The index Commodities consist of Light, Sweet Crude Oil (WTI), Heating Oil, Brent Crude Oil, RBOB Gasoline, and Natural Gas. The fund invests in futures contracts in an attempt to track its index.
Harsh Weather Affects Oil Supply
When dealing with oil prices, the basic economic tenets of supply and demand are an obvious factor. Right now, harsh weather is hurting supply, which is boosting oil prices in turn.
“Winter storm and arctic blast of cold weather that is making its way south to Houston may have some severe impacts on the oil industry. Frigid weather means that many oil wells may be shut in. Water is produced along with oil, that water can freeze up equipment,” oil analyst Andy Lipow wrote over the weekend, as quoted on CNBC.
“The cold air affects oil production in Canada, North Dakota, Oklahoma, Texas and elsewhere,” the analyst added.
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