Long Crude Trade - ETFs

[MNC87]

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

 

Edited March 21, 2020 by MNC87

[dmedin]

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.

[MNC87]

@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.

[NewYorkMinute]

I would be really interested how to go about buying the EFTS for Brent crude , I got an error or trade only essage on the demo platform, really grateful for tips on how to set up a long term EFTS for Brent or WTI

 

 

Thanks guys

[MNC87]

Did not find anything actually suitable. To invest long term in oil you need ETF made of futures with long duration, while most of the available ones have 1 or 3 months. That is certainly a trap, as we are currently in contango, and therefore the long term correlation will be low.

Any ideas / ETF suggestions would really be appreciated.

Thanks 

 

[MNC87]

Agree, the problem with some of them is that they have quite a bit of Shale Oil producers, and some of them might go bankrupt