Five ETFs To Profit From The Oil Collapse

Oil prices continued their sharp decline as mild weather forecasts added to the commodity’s woes after Organization of the Petroleum Exporting Countries (OPEC) failed to arrive at any agreement to cut production, on Friday. The commodity slumped to its lowest levels in almost seven years, dragging down shares of oil & gas companies and also weighing on the broader market.
 
In the absence of any agreement on production cuts, OPEC as well as non-OPEC members such as Russia, will continue to produce oil in record volume despite weak global demand. In fact, production is going to rise now with Iran set to start exporting oil next year when international sanctions are lifted. (Read: Before the Fed Rate Hike, Buy these Stocks & ETFs)
 
Iran was OPEC’s second largest producer before sanctions and will battle now to regain that position. Further, despite price plunge, US production has not fallen as much as analysts expected earlier. With no end in sight for this supply overhang, the outlook for oil remains negative.
 

 
Even if OPEC somehow agrees to cut production in its next meeting in June, the resulting rally in oil prices would likely bring many smaller producers back into the market and add to supply woes.
 
Now, as the Fed looks all set to raise rates next week and the ECB expected to step up stimulus measures in the coming months, the US dollar may continue to strengthen and pose more headwinds for oil. I believe that oil prices are going to stay “lower for longer”. (Read: ETF Tactics for a Rate-Proof Portfolio)
 
Looking at the longer-term picture, the rise in climate change awareness would also deter investments in this space. Investors looking for ways to profit from the very challenging outlook for oil should consider investing in the following ETFs.
 
US Global JETS ETF (JETS)
 
Airlines are big beneficiaries of cheap oil and a brightening economy. Fuel accounts for a large portion of airlines’ operating expenses and “lower for longer” oil will further boost airlines’ profitability.
 
This product provides investors access to the global airline industry, including airline operators and manufacturers. It uses a smart beta approach in selecting and weighting its holdings and thus charges a slightly higher fee of 60 bps. (Read: Top ETF Stories of November)