5 ETFs To Buy As Crude Crashes On Inventory Built

The pain in the oil patch seems to be prolonging as the U.S. Energy Department’s inventory release showed that crude stockpiles recorded an unexpected build. This hurt oil prices that were already hit by geopolitical concerns. WTI crude ETF United States Oil (USO – Free Report) and Brent crude ETF United States Brent Oil (BNO – Free Report) wentlower by about 5% and 4%, respectively on June 7, 2017.

The EIA report showed that domestic crude built increased by 3.3 million barrels last week, much higher than the consensus estimate of a draw of 3.1 million barrels. Gasoline inventory was also up by 3.3m barrels, diverging widely from the estimated 275,000-barrel decline. As per an article published on 275,000-barrel, this indicates a slackening in demand.

Going forward, the Fed may hike rates in mid-June, which in turn can result in higher U.S. Treasury bond yield and a stronger dollar. If the greenback strengths, all types of commodity investing including oil may take a backseat.

Moreover, a feud is on in the Middle East between Qatar and Saudi-led other Arab states.  These states accused Qatar of nursing terrorism. Now, some investors have started fearing that the OPEC argument may cause instability in the ongoing output cut deal.

Are There Any ETF Ways to Profit from Oil Slump?

While the slump in oil prices is definitely hitting oil exporting nations and several oil companies, it is a blessing in disguise for several others. Lower oil prices normally help companies either by way of lower input costs or increased consumer spending or through both. Indeed, wilting oil prices can have a multiplier effect on the economy and benefit a range of sectors.

Below we have highlighted a few ETFs that should thrive on low oil prices.

Inverse Oil – ProShares UltraShort Bloomberg Crude Oil (SCO – Free Report)

Given the situation, investors might want to consider shorting oil. Though futures or short-stock are some of the possible ways for doing so, there are a host of short oil ETF options which may make more sense for many investors. SCO, which offers twice the inverse performance of daily oil price, is one of the most popular options in the short oil ETF space having an asset base $171.4 million. SCO was up about 10.3% on June 7, 2017.