Crude Oil has seen a pullback based on regulators investigating the speculation in the commodities markets. This may present a great opportunity to get long oil related ETF’s. The economy will rebound at some point and inflation will also be in our near future.
(Short-Term and Long-Term Outlook) “In the short-term, we could see lower crude oil prices. One force hanging over the market is all those millions of barrels of oil in storage at sea. However, there’s not as much as there was in April, when oil stored in tankers peaked at 100 million barrels, according to reports from oil brokers. Since then, trading firms have sold about 30 million barrels into the market. The remaining oil in tanker storage should drop by another 15 percent by the end of this month,” Reports Sean Brodrick from HoweStreet.
“The selling of that oil has helped make up for production cuts by OPEC. But it can’t last forever. And as that oil in storage is used up, the longer-term fundamentals for crude, which are very bullish should come back into play. Add in the fact that the economies of Asia are shifting into higher gear and that the U.S. dollar could be cruising for a bruising, and yes, I think the next move to the upside in oil could be quite explosive,” Brodrick Reports.
(Three Ways to Play Oil’s Big Trend) “If oil breaks out to the upside, I’d recommend using ETFs that hold baskets of oil stocks to play that move. Oil industry stocks should be leveraged to the price of oil, which should give them an even bigger move percentage-wise. Here are the 3 ETF’s listed below:
The SPDR Energy Sector ETF (XLE) – the granddaddy of oil ETFs holds famous names including Chevron, and Exxon (22 percent of the fund) and ConocoPhillips.
The SPDR S&P Oil & Gas Exploration and Production ETF (XOP) – this holds explorers and producers including Tesoro, Holly, Frontier Oil and more.
The Oil Service HOLDRS (OIH) – this is stuffed with oil service names, including Schlumberger, Halliburton and Transocean.
All of these funds have pros and cons. Just do your own due diligence, have the stomach for volatility, and be ready to get out when the gettin’s good. It’s a trader’s market, and oil is more explosive than ever, but you can ride it to potentially big gains,” Brodrick Reports.
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