Oil price down despite OPEC efforts
OPEC inked a deal last year between its members and oil producing non-members like Russia to curtail total production. So far the deal hasn’t don’t much to reduce overall production from the group.
Two countries that were exempt from the deal, Libya and Nigeria, have offset production declines from other countries. The lack of supply constraints mean that effects on the price of oil from the deal have been apparently slight.
There is some speculation that this week’s meeting, which will take place in Abu Dhabi, will see caps applied to one or both of those countries in order to stop this effect. We’ll get a sense of where the oil price cartel sees the market this week. On Thursday OPEC will publish its report on progress made in the month of July.
While oil prices have risen so far this Summer, most commentators have put that down to demand rather than supply side factors. The cheaper gasoline price at the outset of the Summer appears to have driven a record Summer driving season.
If the increase in price has been based on seasonal changes, there may be some air taken out of the oil price as that demand drops off. That’s the case recently outlined by Thomas Byrne of the bond squad right here on Learnbonds.
VelocityShares 3x Long Crude Oil ETNs linked to the S&P GSCI Crude Oil Index ER Suffers
Those with money in the VelocityShares 3x Long Crude Oil ETNs linked to the S&P GSCI Crude Oil Index ER (NYSEARCA: UWT) have been suffering for quite a while, unless they’ve been trading in and out extraordinarily adeptly.
On Monday morning shares in the exchange traded fund were selling for $15.20 right before the market opened. That is a decline of about 2.8 percent from close on Friday afternoon. The leveraged ETF is based on an index which multiplies the changes in daily oil prices. That means that price movements can be extremely volatile.
Over the last 6 months the ETF has dropped about 37 percent of its value. Because of the nature of leveraged ETFs, they are almost destined to lose value over time.
The VelocityShares 3x Long Crude Oil ETNs linked to the S&P GSCI Crude Oil Index ER (NYSEARCA: UWT) and other instruments like it are too risky for most investors. That’s especially true when the oil price is determined by statements of members of an apparently non-functioning global cartel.