The DBO ETF (Invesco-Powershares) created in 05/2007 replicates the crude oil prices through future contracts on light sweet crude oil (WTI).
The costs of the DBO ETF are 0.75% which is in the average high cost on this type of product.
Oil is a very volatile asset, and as any commodity does not give rise to a dividend and is a risky asset. AUM amount to approximately $483M.
Alternative ETFs: OLO (Deutsche Bank USD), BNO (US Commodity Fund USD).
Index & components
Oil is a commodity that is a fossil fuel produced by a few countries like Saudi Arabia, the US, Russia, Iran, Iraq, Algeria or Nigeria. It is extracted by drilling or hydraulic fracturing and is then delivered - processed / refined or not, in consumer countries, mainly European and Asian and can produce fuels such as gasoline, gas oil or kerosene once refined and processed chemically.
Depending on its origin and final destination, oil has different names and its price may also vary. These differences in the price of oil depend on its quality. We differentiate the Arabian Light, which comes from the Middle East, the Brent oil that is produced in the North Sea, and finally the WTI or "West Texas Intermediate" which is produced in the United States and is the benchmark of the oil market. The reference unit for oil is the barrel, which is actually about 159 liters. The price of a barrel of oil is quoted on the international market continuously, while two financial centers share its rating, namely New York for WTI and London for Brent.
Supply, therefore production and its stability are of course key determinants of the price of a barrel. It is OPEC, made up of several major world producing countries, which is in charge of determining - by consensus - how many barrels a day will be produced and its publications are therefore followed with attention by traders, as was the case recently.
Demand factors are also critical. Thus, an increase in the energy needs of a major consumer country may have a greater or lesser influence on the price of the barrel.
Globally, global growth is a very important factor for demand, while oil needs tend to shrink at equal demand, as new technologies tend to reduce consumption. In the long term, the electric car could cause a negative shock on global demand for crude oil, as China is investing heavily in renewable energy.
Since 2014, oil prices have divided by 3 due to a supply shock caused by the arrival on the market of American shale oil which has put very strong pressure on the oil-producing and oil companies that have significantly reduced their investments. This stoppage of industrial investment, in addition to OPEC's production cuts, has for the moment had a moderate bullish impact on crude prices. This is due to the plethoric production of unconventional oil (shale) that floods the market and counterbalances OPEC's reduction efforts.
Latest developments
WTI oil rose for the second consecutive year in 2017 (+ 4.9%) after a rebound of 9.2% in 2016 and increased by 1.7% in 2018.
The good behavior of WTI is linked to the strong dynamics of the demand, and like equities it is also sensitive to themes likely to play negatively on global growth, such as the risk of commercial war or bond crisis. However, a resurgence of moderate inflation would be rather favorable to crude prices.
The main medium-term bullish catalyst is the "production gap" expected from 2019, which corresponds to the underinvestment of oil companies since 2014 and which can not be filled indefinitely by shale oil, especially by taking into account has a natural erosion of 5% of the capacity of the wells.
The main risk would be a negative shock on demand, which would compensate for an offer that will find its limits from 2019. Conversely, oil prices could surge again in the event of a conflict between Israel and Iran, while Venezuela's collapse is likely to further narrow the supply available.
