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Long Crude Trade - ETFs

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Long Crude Trade

Hi guys,

Given the recent developments on markets since the Coronavirus outbreak and the disputes within OPEC+ crude is now in the low 20-region. Assuming this worldwide mess will get sort out, demand will pick up and that low prices will send some players into bankrupcy, I think investing long term in non-levered crude ETF is best practice. Just getting back to 30 would be a huge profit. Since I invest in pounds, I better get the one the GBP-hedged one (ticker PBRT.L).

Any thoughts? Thanks

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Edited by MNC87
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That's the way to go, you will just need to be patient.

Everything will eventually bounce back, with the proviso that capitalism retains its current form.

A lot of people desire in their heart of hearts for a new, socialist world order.

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@MNC87,

How can you be sure the $20 price level is not broken by Crude Oil?

In the UK we have another 12 weeks of possible shut downs and self isolating so there is still the potential of further price weakness. We will also see false rallies. There is no confirmed cure and therefore going long right now would be a risk albeit a smaller risk than going long prior to all these mayhem. 

Lots of countries around the world have not reached peaked deaths / peaked positive test results so just be mindful of this before even thinking about going long. Also what if there is a long period of sideways action then you money is tied into an asset which is not moving or making any money for you. 

I can see what you are thinking from a long term investing perspective but you may want to drip feed money in slowly per week / per month until there is more clarity in the situation. 

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@TrendFollower

I understand your point, there will be demand destruction, but you are basing the recovery of oil on just the demand, which will eventually come back maybe in 6 to 12 months. 
My point here is that current price levels are not sustainable for none of the 3 main players; saudis, Russia and US. Most of US's shale oil producers will go bust - most of them in Texas, which by the way is 100% Republican. Therefore, I expect Trump to move in the coming weeks to make the 3 players move a bit curtailing production.

With current environment, I see a floor at low-10s, but it is not an easy task to catch the bottom and therefore a gradual entry, like you recommended is the best way here.

 

 

Don't get me wrong, I am still shorting oil, but I believe current prices are unsustainable and that production will eventually be cut, regardless of what happens with demand.

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@MNC87,

When I look at the 'Monthly' and 'Weekly' charts for both Brent and WTI Crude then I can see around the $16.00 as a possible price point should things continue to get worse. At that point I agree there is enormous upside potential. Don't forget we are going to see a mammoth 'short covering' rally in Oil of gigantic proportions as profits will want to be taken. 

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