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Now that OPEC has announced that it will continue to pump out more oil despite piling-up supplies and falling demand, traders have set a new bottom for the long-exhausted commodity oil of $20 which is way below the psychologically resistant level of $40. OPEC terminated the production limit after the December 4 meeting. Though the investing was expecting in the same line as the OPEC top brass Saudi Arabia and other Gulf countries are more concerned about market share, per CNBC , rather than falling oil prices. Goldman Sachs viewed the outcome of this meeting as a serious threat to future oil prices and commented that this ‘leaves risks to their forecast as skewed to the downside in coming months, with cash costs near $20/bbl ‘. However, all are not as bearish as Goldman since HSBC expect non-OPEC supply growth to decrease from 2.3 mbd in 2014 to 0.9 mbd in 2015, before turning negative in 2016. HSBC also projects Brent crude to average $60 per barrel in 2016, $70/bbl in 2017 and $80/bbl in 2018. While nobody knows where the bottom is, one thing for sure is that oil is due for a wilder or a rather sluggish run in the coming days. At the time of writing, oil prices are hovering around the $40 level and are giving no signs of a near-term recovery. While a WTI crude oil ETF like United States Oil Fund (NYSEARCA: USO ) lost over 9.8% in the last five trading sessions, there are other corners as well which are linked to the commodity oil and are equally at risk if black gold slips to $20 or remains stressed. Those corners are key oil producing and exporting countries which have been exhibiting a downtrend, as revenues earned from this commodity account for a major share of their GDP. We have seen this trend in a number of countries so far this year. Market Vectors Russia ETF (NYSEARCA: RSX ) The Russian economy contracted 4.1% year over year in Q3. The economy shrunk for the third successive quarter with stubbornly low oil prices being mainly responsible. Among the other reasons for the deterioration are the ban on Russia by the West on the Ukraine issue and sky-high inflation. Oil – seemingly the main commodity of the nation – posed huge risks to the nation. The plunge in oil prices forced investors to think twice before investing in Russia even at bargain prices. In fact subdued oil prices and a stronger U.S. dollar on the Fed lift-off bet put pressure on the Russian currency ruble which lost about 17.2% in the last one year against the greenback (as of December 4, 2015). RSX is the most popular and liquid option in the space with an asset base of $1.83 billion and average trading volume of more than 8 million shares a day. The energy sector accounts for about 43% of RSX, which charges 61 basis points as expenses. The Zacks ETF #4 (Sell) fund advanced 5.9% but lost 6.5% in the last five trading sessions (as of December 7, 2015). Global X FTSE Norway 30 ETF (NYSEARCA: NORW ) Norway is among the top 10 nations famous for oil exports and with its comparatively low population, oil forms the key part of the country’s GDP. As per U.S. Energy Information Administration (EIA), Norway is the biggest oil driller in Europe. The most popular way to play the country is with Global X ETF NORW. The product tracks the FTSE Norway 30 Index, a benchmark of 30 companies that focus on Norway, charging investors 50 basis points a year in fees. The ETF is heavily concentrated on energy stocks, as these make up for nearly 45% of the portfolio. In fact, Norwegian oil giant Statoil accounts for one-fifth of the portfolio alone, suggesting a heavy concentration. Thanks to a slump in oil prices, NORW has lost about 11.3% in the year-to-date frame and was down 2.9% in the last five trading sessions. iShares MSCI Canada ETF (NYSEARCA: EWC ) Canada is also among the world’s top 10 oil producers. The oil, gas and mining sector make up about over a quarter of the Canada’s economy. Its currency plummeted to an 11-year low level after the disappointing outcome of the OPEC meeting. Canadian currency lost about 15% year over year while jobless data spiked last month. The best way to invest in Canada is the iShares MSCI Canada ETF, a product that has nearly $1.89 billion in assets. The fund tracks the MSCI Canada Index, which holds just under 100 stocks in its basket. Energy makes up a huge chunk of assets accounting for one-fifth of the total. The fund was off about 19% in the last one year. The fund has lost 22.7% this year and has a Zacks ETF Rank #4. The fund lost over 4.4% in the last five trading sessions. Global X Nigeria Index ETF (NYSEARCA: NGE ) Nigeria – an OPEC member – is one of the biggest net crude exporters in the world. An option to invest in Nigeria is a Global X ETF, NGE. This new product follows the Solactive Nigeria Index, giving exposure to about 25 companies and charging investors 68 basis points a year in fees. Though financials actually take the top spot in the ETF, making up about 45% of the holdings, energy has about 10% exposure. That is why, it is important to see how the fund fared during the recent oil price downturn. NGE shed about 31.1% during the last one year and is down 30.8% so far this year. NGE retreated 1.4% in the last five trading sessions. The fund has a Zacks ETF Rank #4. Original Post Scalper1 News
Scalper1 News