Global investment bank RBC Capital Markets is expecting more increases in oil prices, going as far as saying that crude could reach the $80 price level this summer.
Overall, RBC Capital Markets is forecasting Brent crude prices to average $75 for 2019–up from a previous 2019 forecast of $69.50 per barrel. Furthermore, their outlook for U.S. West Texas Intermediate crude rose from $61.30 per barrel to $67 for 2019.
“We see price risk asymmetrically skewed to the upside spurred by geopolitically infused rallies that could shoot prices toward or even beyond our high-end, bull-case scenario and test the $80/bbl mark for intermittent periods this summer,” RBC strategists Michael Tran, Helima Croft and Christopher Louney said in a research note.
Concerns for weak demand of oil was offset by Organization of the Petroleum Exporting Countries (OPEC) supply cuts and experts expecting U.S. inventories to be lesser than expected. U.S. sanctions on Iran and Venezuela are also curbing supply.
Fears of a global economic slowdown are also weighing on the minds of oil traders. After the U.S. central bank kept interest rates unchanged last month, Federal Reserve Chairman Jerome Powell said that “we’ve noted some developments at home and around the world that bear our close attention.”
That dovishness has translated into more cautious investors who are unwilling to dial up the risk with respect to capital allocation. A global economic slowdown could also keep oil prices in check with the prospect of weaker demand.
“In short, there is room to run to the upside given that geopolitical hotspots are still a clear and present danger for the market, but many wounded bulls remain following the Q4′18 washout,” the analysts said, referring to oil prices falling to record lows near the end of 2018.
For traders looking for big gains by levering up their positions, here are 3 ETFs to watch ahead of the summer:
1. United States 3x Oil (USOU )
USOU seeks the daily changes in percentage terms of its shares’ per share NAV to reflect three times the daily change in percentage terms of the price of a specified short-term futures contract on light, sweet crude oil. USCF will endeavor to have the notional value of the fund’s aggregate exposure to the Benchmark Oil Futures Contract at the close of each trading day approximately equal to 300% of the fund’s NAV. The Benchmark Oil Futures Contract is the futures contract on light, sweet crude oil as traded on the NYMEX, traded under the trading symbol “CL.”
2. ProShares UltraPro 3x Crude Oil ETF (OILU )
OILU seeks to return a multiple (3x) of the performance of the Bloomberg WTI Crude Oil Subindex for a single day. The fund seeks to meet its investment objective by investing, under normal market conditions, in futures contracts for WTI sweet, light crude oil listed on the NYMEX, ICE Futures U.S. or other U.S. exchanges and listed options on such contracts.
3. Direxion Daily S&P Oil & Gas Exp. & Prod. Bull 3X Shares (GUSH )
GUSH seeks daily investment results equal to 300% of the daily performance of the S&P Oil & Gas Exploration & Production Select Industry Index. GUSH has been able to achieve its performance figures by investing at least 80% of its net assets in securities, ETFs and other financial instruments that provide daily leveraged exposure to the index.
For more oil ETF investing strategies, visit our oil category.
