Whether you’re a bull or a bear, the oil market should keep traders happy as a push-pull dichotomy exists when it comes to the latest flood of news from that corner of the energy sector.
On one hand, oil could be trending higher despite negative earnings reports from big players like Chevron and Exxon— per a CNN report, “Exxon lost $1.1 billion, the company’s second straight quarterly loss, while Chevron posted a loss of $8.3 billion.”
“After a bad day for big oil with terrible earnings, we’re starting to see the impact in barrels,” said Phil Flynn, an analyst at Price Futures in Chicago. “This suggests that we will see a tighter market in the future, and if the economy turns around we will have trouble meeting demand.”
With gold demand at record levels, it means that the U.S. dollar is experiencing weakness on the opposite end of the trade. This will continue to keep oil prices afloat.
“Global stimulus and a weak dollar will continue to support oil prices, as historically oil is seen as a hedge against inflation,” said Keshav Lohiya, Chief Executive Officer of Consultancy Oilytics.
Of course, the big question mark remains the Covid-19 pandemic, which is creating murky forecasts for big oil’s brass.
“The past few months have presented unique challenges,” said Chevron Chairman and CEO Michael Wirth. “The economic impact of the response to Covid-19 significantly reduced demand for our products and lowered commodity prices.”
As noted, whether you’re a bull or bear, it opens up opportunities for leverage-hungry ETF traders.
Trading Opportunities in Oil ETFs
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).