The global transition to alternative energy sources is dominating the energy news in the capital markets as of late. However, that doesn’t mean there aren’t any opportunities in oil. The market could be poised for a turn for the better after its rough first half of 2023.
“Betting on a tighter oil market has been a bad trade for most of this year. But there are signs it’s finally paying off,” a recent Bloomberg article noted.
China, in particular, could help fuel demand as the effects of the pandemic start to dissipate. On the supply side, cutbacks by OPEC could help add additional tailwinds for oil prices to trend higher.
“After languishing for months, crude surged above $80 a barrel in London last week as fuel demand in China and elsewhere recovers from the pandemic to reach new highs,” Bloomberg added. “That’s happening just as production cutbacks by Saudi Arabia and its OPEC+ allies are set to rapidly drain storage tanks around the world.”
2 ETF Options in Oil
As a portfolio diversification tool to add commodities exposure or for short-term trading opportunities, oil ETFs can provide easy ingress. One fund to consider is the Invesco DB Oil Fund (DBO ).
Per the fund description, DBO seeks to track the DBIQ Optimum Yield Crude Oil Index Excess Return (DBIQ-OY CL ER). This particular index reflects 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.
Additionally, a rise in oil demand could also pave the way for ancillary services in the oil industry to gain strength. That said, for indirect exposure to oil prices, one ETF to consider is the Invesco Dynamic Oil & Gas Services ETF (PXJ ).
The fund seeks to track the investment results of the Dynamic Oil Services Intellidex Index. The Index is composed of stocks of 30 U.S. companies that assist in the production, processing and distribution of oil and gas.
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