Quick Thoughts on Oil ETFs


Our trades on the U.S. Oil Fund (USO) and PowerShares DB Oil ETF (DBO) calls have all round tripped. So has the ETF position on U.S 3x Oil Fund (USOU).

As covered in the Oil Is Going To A Brazillion article I don’t think we have a lot of risk in these positions, however, this week might not be fun.

If oil heads lower, I will expand my positions. However, remember to move very slowly, then suddenly. Averaging in is based on price points, not just the price falling. We want to target the 50dma and the 200dma as it is usually support level. 

We are basically at the 50dma on USOU. The next buy point is quite a bit down, in the middle $40s. 

USOUUSO is also at the 50dma and the 200dma is about $12. 

USOFor DBO the 200dma is a bit over $10.

DBOThe spot price of WTI seems to have support at about $65 and $59.

As I mentioned in the Brazillion piece (less fund title on free side) the speculators are shifting positions. They’ll be quick to move back to the long side. The first ones will do so just before the OPEC meeting June 22nd.

So, we could see this volatility a few weeks. Patience. Oil demand is above supply and Saudi Arabia could give a crap about a Presidential tweet. They just want President Trump to keep the pressure on Iran and get Aramco off by next summer. Focus on those two major factors in Saudi Arabia’s thinking, not short-term trader narratives. 

Disclosure: I am/we are long USOU, DBO.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: I own a Registered Investment Advisor – https://bluemoundassetmanagement.com – however, publish separately from that entity for self-directed investors. Any information, opinions, research or thoughts presented are not specific advice as I do not have full knowledge of your circumstances. All investors ought to take special care to consider risk, as all investments carry the potential for loss. Consulting an investment advisor might be in your best interest before proceeding on any trade or investment.I own a Registered Investment Advisor – https://bluemoundassetmanagement.com – however, publish separately from that entity for self-directed investors. Any information, opinions, research or thoughts presented are not specific advice as I do not have full knowledge of your circumstances. All investors ought to take special care to consider risk, as all investments carry the potential for loss. Consulting an investment advisor might be in your best interest before proceeding on any trade or investment.