Oil Field Battleground – Bulls Versus Bears
The battle between the bears and bulls over crude oil prices is heating up.
According to a report from Bloomberg, analysts are evenly split on the outcome of next week’s OPEC meeting. Half of the experts expect OPEC to cut production while the other half expects them to keep production the same.
The price of WTIC crude oil is down 30% from a high of $107 per barrel in June to around $75 today. Crude oil prices recently hit their lowest prices since 2010.
Is this an opportunity to make a bullish trade on a leveraged ETF that holds oil and gas stocks at a great price? Or should you make a bearish trade on an inverse leveraged ETF that will benefit from a bigger drop in oil prices?
Here’s what the bulls are saying…
A 30% drop in oil prices is well into bear market territory. But the selloff is likely overdone and due for a relief rally.
The drivers of the recent selloff were a combination of supply and demand factors… a slowdown in global economic growth caused demand to be weaker than expected and an increase in supply from new production caused a glut of oil in the market.
But the supply glut will not last long…
China just announced a surprise interest rate cut to spur economic growth. So we should the estimates for global economic growth and demand for crude oil increase.
And any production cut by OPEC, no matter how small, will send the markets a message. If they are willing to do what’s necessary to keep oil prices from falling, oil prices will come racing back.
Here’s what the bears are saying…
Crude oil is in a bear market. And it’s going much lower before it finds a bottom.
Right now the countries that control OPEC are willing to let oil prices fall. They want to squeeze out the competition from more expensive sources like those from fracking in the US.
They see this as an opportunity to regain their strangle hold on global supply. In short, they want to hold onto their market share at the expense of lower oil prices.
If you think the bulls are right, take a look at buying the ProShares Ultra Oil & Gas ETF (DIG). This ETF seeks daily investment results that are twice (200%) the daily performance of the Dow Jones U.S. Oil & Gas Index.
If you think the bears are right, take a look at buying the ProShares UltraShort Oil & Gas ETF (DUG). This ETF seeks daily investment results that are twice (200%) the inverse (opposite) of the daily performance of the Dow Jones U.S. Oil & Gas Index.
Good Investing,
Corey Williams
Category: ETFs, Inverse ETFs, Leveraged ETFs
