Oil traders have been having one wild ride since the height of the pandemic sell-offs in March was followed by a catastrophic drop to negative prices in April. However, as oil prices continue to recover, the physical market looks primed for more gains in oil prices.
U.S.-China trade once again came to the forefront as oil prices fell on demand fears coupled with a rise in COVID-19 cases. U.S. President Donald Trump quelled fears in a tweet that the U.S.-China trade agreement was “fully intact.”
“Oil prices need a healthy relationship between the U.S. and China,” said Edward Moya, senior market analyst at OANDA in New York, per a CNBC report.
The report also noted that “Bank of America (BofA) Global Research has lifted its oil price forecast for this year. It now expects Brent crude to average $43.70 a barrel in 2020, up from a previous estimate of $37.”
“Looking at the strength of the physical market and recovering global oil demand, we think that the crude oil price is still on its way higher,” Nordic bank SEB said in a note.
In Tuesday’s trading session, oil faltered a bit after the “American Petroleum Institute (API) estimated on Tuesday another build in crude oil inventories, this time of 1.749 million barrels for the week ending June 19,” per an OilPrice.com report. “Analysts had predicted a smaller inventory build of 299,000 barrels.”
Oil Exposure via ETFs
Short-term traders betting on more price increases can look to ETFs like the United States 3x Oil (USOU ), ProShares UltraPro 3x Crude Oil ETF (OILU ) and the Direxion Daily S&P Oil & Gas Exp. & Prod. Bull 2X Shares (GUSH ). Another interesting option is the ProShares K-1 Free Crude Oil Strategy ETF (OILK ).
OILK seeks to provide total return through actively managed exposure to the West Texas Intermediate crude oil futures markets. The fund’s strategy seeks to outperform certain index-based strategies by actively managing the rolling of WTI crude oil futures contracts.
The fund generally will not invest directly in WTI crude oil futures. The advisor expects to gain exposure to these investments by investing a portion of its assets in the ProShares Cayman Crude Oil Strategy Portfolio, a wholly-owned subsidiary of the fund organized under the laws of the Cayman Islands.