Three Top Ways to Trade the Short Side of Oil

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Trader Fred DeMarco works on the floor of the New York Stock Exchange, Friday, Feb. 28, 2020. Global stock markets are falling further on spreading virus fears. (AP Photo/Richard Drew)

So much for the oil recovery.

Oil prices could be headed lower thanks to the threat of the coronavirus and weak demand.

According to the Houston Chronicle, surging cases of the virus are stoking demand fears all over again.  In fact, global oil demand could slip by 2.5 million barrels a day worst case scenario.

On top of that, we could see a return of the supply glut that helped sink oil deep into negative territory.  “As we move into the second half of the year, the energy rebound is showing signs of stalling… as traders assess the threat of the recent resurgence in COVID-19 cases and the looming possibility of more economic shutdowns in the back half of the year,” said Sevens Report Research, as quoted by MarketWatch.

“While a big draw on gasoline in the summertime is healthy, the US is really close to all time record highs in crude oil and distillate storage, which is not as healthy,” said Bob Yawger, director of energy futures at Mizuho, as quoted by the Economic Times.

Should things worsen, investors may want to consider trading the short side of oil.

Not only are investors shorting big oil names like Exxon Mobil (XOM) and Chevron (CVX), or even using put options, they’re jumping into short oil ETFs, including:

  • ProShares UltraShort Bloomberg Crude Oil (SCO)
  • ProShares Short Oil & Gas (DDG)
  • ProShares UltraShort Oil & Gas (DUG)

 

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