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Oil ETFs in Focus Amid Trade War Blows & Rising US Supply

Sweta Jaiswal, FRM

Slowdown in global economic growth, escalating trade war and rising US crude inventories are some of the major headwinds acting as deterrents to the rally in oil prices. Per a Bloomberg report, there has been more than 16% decline in oil prices since the Saudi Arabian attacks in mid-September. To everyone’s surprise, Saudi Arabia rapidly resolved the supply issues and resumed production in full capacity. Let’s study the looming headwinds in detail that are stunting the oil price surge (read: 4 Sector ETFs & Stocks to Bet on Ahead of Q3 Earnings).

Escalating Trade Tiff

Tensions have intensified between the world’s two largest economies after the Trump government added some of China’s top AI start-ups to its trade blacklist. The new list includes around 20 Chinese public security bureaux. Moreover, eight companies including video surveillance firm Hikvision along with prominent facial recognition technology companies like SenseTime Group Ltd and Megvii Technology Ltd have been blacklisted. The move came at a time when investors are eyeing a solution to the trade tussle that has persisted for more than 15 months now.

The unrelenting global trade disputes are also decelerating global economic growth, which in turn, is resulting in waning demand for oil. In fact, given the current scenario, major traders like Vitol SA have started expecting the oil prices to be around $50 a year (read: ETF Strategies to Follow Amid Recession Scares).

Rising US Stockpiles

Increasing US crude oil inventories have been causing hinderances to the rise in oil prices. The latest weekly report from the Energy Information Administration reflects a last-week surge in the U.S. crude stockpiles by 2.93 million barrels. This compares with a median estimate of a 1.9-million barrel per a Bloomberg survey. In fact, US oil output reached record levels of 12.6 million barrels a day.

Oil ETFs in Focus

This has compelled many investors to take a closer look at the oil commodity space and related ETFs (see all Energy ETFs here).

United States Brent Oil Fund BNO

The fund tracks the daily price movements of Brent crude oil (read: Oil ETFs in Focus as US, Russia & OPEC's Output Declines).

AUM: $75.7 million

Expense Ratio: 0.90%

YTD Return: 15.4%

United States Oil Fund USO

The United States Oil Fund seeks to track the daily price movement of WTI light, sweet crude oil (read: Top ETF Stories of Third Quarter).

AUM: $1.30 billion

Expense Ratio: 0.73%

YTD Return: 12.8%

Invesco DB Oil Fund DBO

The fund tracks changes, whether positive or negative, in the level of the DBIQ Optimum Yield Crude Oil Index Excess Return plus the interest income from the holdings of primarily US Treasury securities and money market income less expenses (read: Profit From the Oil Rush With These ETFs).

AUM: $256.1 million

Expense Ratio: 0.78%

YTD Return: 8.8%

US Commodity Funds United States 12 Month Oil USL

The fund replicates with possible accuracy the movement of West Texas Intermediate light, sweet crude oil.

AUM: $50.8 million

Expense Ratio: 0.82%

YTD Return: 10.9%

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United States 12 Month Oil Fund, LP (USL): ETF Research Reports
 
United States Brent Oil Fund LP (BNO): ETF Research Reports
 
United States Oil Fund, LP (USO): ETF Research Reports
 
Invesco DB Oil Fund (DBO): ETF Research Reports
 
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