Oil prices have bounced since April’s memorable sell-off, but a recent CNBC report noted that Russian energy minister Alexander Novak is forecasting a modest recovery next year. The bleak picture for oil prices could come via weak demand and continued effects of Covid-19.
“My forecast for 2021 is a little more modest than that of Goldman Sachs. I predict the range of $50-$55 per barrel, as the average price for the year. But we can expect volatility in the market, with both highs and lows,” Novak told CNBC’s Hadley Gamble on Friday.
Per the report, “Goldman Sachs last week published a note predicting international benchmark Brent crude at $65 per barrel by the third quarter of next year, with additional upside through 2021 as inventories start to normalize and the oil market ends up in backwardation by next summer.’”
“The future recovery is going to be much slower,” Novak said. “Not the fast trend we have observed in the first few months. Mostly due to the overall transformation and the changes in the energy balance and in the behavior pattern of consumers, first and foremost.”
In terms of how business travel will affect oil prices, the move to more digital meetings amid social distancing measures will also hurt demand.
“This clearly transforms the energy balance and will impact demand recovery,” he said. “We would like to produce more to assist economic recovery but we are constrained by the limited demand. And the rate of its growth is also limited.”
Leveraged ETF Trades in Oil
Short-term traders betting on even more price increases can look to ETFs like Direxion Daily S&P Oil & Gas Exp. & Prod. Bull 2X Shares (GUSH ). GUSH seeks daily investment results, of 200% of the daily performance of the S&P Oil & Gas Exploration & Production Select Industry Index.
The fund, under normal circumstances, invests at least 80% of its net assets (plus borrowing for investment purposes) in financial instruments and securities of the index, ETFs that track the index and other financial instruments that provide daily leveraged exposure to the index or ETFs that track the index. The index is designed to measure the performance of a sub-industry or group of sub-industries determined based on the Global Industry Classification Standards.
On the bearish side of the trade, there’s the Direxion Daily S&P Oil & Gas Exploration & Production Br 3X ETF (DRIP ). DRIP seeks daily investment results that equal 300% of the inverse of the daily performance of the S&P Oil & Gas Exploration & Production Select Industry Index, which is designed to measure the performance of a sub-industry or group of sub-industries determined based on the Global Industry Classification Standards (GICS).