Oil ETFs Bullish; Top 3 Investment Opportunities
The past couple of weeks have seen oil ETFs across the board break their 200 day moving averages, often touted as seriously tough points of resistance, with experts suggesting a bull market headed our way. The industry as a whole looks set for healthy growth, thanks in no small part to US oil companies, which leads us to ask if it’s worth investing in oil ETFs now, and which ones we should look at.
The dramatic increase in US oil production was one of 2012’s biggest stories in terms of commodities. The country will remain the fastest growing source of oil for 2013, but has eyes on the prize of being the world’s biggest producer of oil by the end of the decade. Saudi Arabia is currently in the top spot, and it will require considerable effort for the US to overtake them.
The balance is very delicate of course, with some analysts asserting that production can only weaken if the price of a barrel drops below $80.
Part of the reason ETFs look to be doing strongly is because not only have US oil companies increased production, their profits are way up too, particularly when it comes to those in the Midwest.
It’s clear from last year’s success, and the likely profitability of 2013, that oil ETFs focusing on the US markets should be the ones to go for. It looks like they’re going to do very well, and there doesn’t seem to be a better region to choose, especially with so many having broken moving averages recently. Be aware however, that there have been indicators that suggest some may be overbought.
With all of this in mind, the following three ETFs appear set for a good 2013:
United States Oil Fund (USO): This is one of the most popular commodity products to be found anywhere, and is widely traded. There are nearly 9 million shares traded in USO each day. Be aware that it invests in futures trading, but is an ideal candidate for the short term. If you’re going to be investing in the oil market, then this is usually the very first stop.
Market Vectors Unconventional Oil & Gas (FRAK): Fracking has gained some notoriety in the press recently, but it’s certainly on the increase. FRAK, as indicated by its name, track some of the more unconventional oil and gas companies that are using new methods. It’s a relatively new fund, but if experts are to be believed, it’s at the forefront of oil technology.
Energy Select Sector SPDR (XLE): This particular ETF is being backed to have a good 2013 because a good proportion of it consists of some of the United States’ largest oil companies including Exxon Mobil and Chevron. Production is on the increase, with few signs of slowing, and it seems as though their performance alone could carry this ETF. Exxon recently knocked Apple off the top spot for most valuable company in the world. There’s also a likely dividend of approximately 1.7 percent to look forward to.