OOO - Betashares Crude Oil Index ETF - Currency Hedged (Synthetic)

[beginnerinvestor]

Well there you go. You could lose the entire investment after all !

Both Aussie "OOO" and it's brother from another mother US "USO" will both underperform Crude Oil price. Both over longer periods of time as you are suggesting due to fees and futures contracts swaps and in the short term as we found out with Contango issues, I'll copy and paste what I posted earlier for your consideration:

Thanks cutz, I am up monitoring what the F this thing is up to. As usual: A massive underperformance by about 6:1 to Oil price.

Yes I know all that said about Futures contracts being swapped around and contango etc, but man o man an ETF that is supposed to track Oil price, this is screwed up !

Here's the Black Liquid itself (Used to be so valued/priced and even called Black Gold):

Here's the ETF:

Gives little hope for asx: "OOO" to have a good recovery, even with a 27% odd price rise in Crude.

What Chronos-Plutus said was OOO tracks GSCI, but not WTI, although I don't know why it wouldn't track the WTI.

Looking at my graph, it mostly tracks the GSCI, but for the last month hasn't risen as much.

I will need to research whether there is a realistic risk of it ever reaching a zero price, and decide if I wanna buy some or not.

 

[frugal.rock]

My thoughts are, I think the risk of it going to 0 is low, but not impossible, just like any stock.
As said somewhere above, consider the ETF as a regular stock for trading purposes. If oil goes up and the ETF goes up as well, happy days.
It does move around somewhat with the general market observations on a daily basis.
Having said that, I have no idea about futures and 3 month contracts etc.

 

[aus_trader]

My thoughts are, I think the risk of it going to 0 is low, but not impossible, just like any stock.
As said somewhere above, consider the ETF as a regular stock for trading purposes. If oil goes up and the ETF goes up as well, happy days.
It does move around somewhat with the general market observations on a daily basis.
Having said that, I have no idea about futures and 3 month contracts etc.

I think you are correct on this call FR !

If we look back there was an absolute avalanche of factors that all converged on the oil price to be decimated and to be pushed into -ve territory briefly:
- Plummeting demand due to lock down
- Surging supplies as even the high cost producers kept pumping as it was very costly to plug a well and re-start at a later date
- Tanker and Oil storage facilities were full that it was impossible to get rid of the Oil produced i.e. producers had to pay customers to take it off their hands, hence the brief dip into -ve territory
- Saudi-Russian tensions/deals to crush the Oil price which I think was a cunning plan to bankrupt the high cost US shale and Tar Sand Oil producers

As a side note, I think the attempt to crush the US Oil producers will get no attention at the moment as to what the US is currently dealing with virus deaths and now violence on streets:

 

[aus_trader]

So my view is the same, we are unlikely to see Oil head back down to zero or -ve territory. There will be volatility and pull backs as usual.

Only difference is I am getting exposure via Oil/Gas energy stocks rather than through the ETF.

 

[frugal.rock]

Not sure if ooo was paying a dividend previously? Something to consider if they don't pay a divvy when next due, if due.

 

[aus_trader]

Not sure if ooo was paying a dividend previously? Something to consider if they don't pay a divvy when next due, if due.

That's another thing I don't understand. When you are an ETF that emulates a commodity price such as a Gold Price ETF or Oil Price ETF, where is the Divided generated from ?

I understand for Stock ETFs the Fund manager can generate a dividend distribution as they collect all the dividends that the companies in that ETF pays and re-distributes as a lump sum to shareholders.

As far as Gold ETFs goes, I am not aware of a single one that pays a dividend because Gold doesn't have a yield. How can a Oil ETF generate one ? There is just too many unanswered questions with this ETF !

 

[qldfrog]

Not sure if ooo was paying a dividend previously? Something to consider if they don't pay a divvy when next due, if due.

Yes,there was a dividend attached

 

[frugal.rock]

Thanks Frog, wasn't sure.
So scenario's to consider then;
No dividend,
Reduced dividend,
Increased dividend... haha?
Timing of one of above.

 

[danthuluri]

People are coming out of lockdowns. Businesses are starting and consumption will increase drastically. Personally i don' see any downside from here except a huge second wave of Coronavirus.

 

[qldfrog]

People are coming out of lockdowns. Businesses are starting and consumption will increase drastically. Personally i don' see any downside from here except a huge second wave of Coronavirus.

As long as OOO is aligned to oil consumption and price...

 

[aus_trader]

People are coming out of lockdowns. Businesses are starting and consumption will increase drastically. Personally i don' see any downside from here except a huge second wave of Coronavirus.

Agree based on the local perspective. I still see issues in the US situation that may impact on the economy therefore Oil and consumption.

 

[frugal.rock]

A bit of a summary.
USA.
Well counts dropping off.
Production still slowing but possibly indicating a bottom soon.
Data is laggy. Behind a week.
I don't have any doubts that the production tap can meet demand.
The demand tap isn't opening rapidly, the world needs to get out of covid19 restrictions.

I can understand the oil industry reducing supply to bring the poo up.
Recover some losses.
Would it be stupid to expect poo hit $80 pb at some stage in the next 12 months?

F.Rock

 

[qldfrog]

A bit of a summary.
USA.
Well counts dropping off.
Production still slowing but possibly indicating a bottom soon.
Data is laggy. Behind a week.
I don't have any doubts that the production tap can meet demand.
The demand tap isn't opening rapidly, the world needs to get out of covid19 restrictions.

I can understand the oil industry reducing supply to bring the poo up.
Recover some losses.
Would it be stupid to expect poo hit $80 pb at some stage in the next 12 months?

F.Rock

$60 max or wells will reopen is my view, and hovering around 40USD a barrel as a medium term let's see

 

[Smurf1976]

Would it be stupid to expect poo hit $80 pb at some stage in the next 12 months?

An issue that's widely overlooked is that an oil well being economic versus uneconomic is more of a financial phenomenon than a geological one.

The Fed can't physically flood the market with oil but they could certainly prop up others to do so and we're living in an era when the seemingly impossible does indeed happen and usually with little if any warning.

Just 5 months ago to this day, the big concern in Australia was about the Sydney fireworks going ahead. Consider all that has happened since then, in a mere 5 months, and I don't think the idea that we see oil companies drilling and producing with no intent of making a profit is out of the question at all if there's some broader political or economic reasoning behind it.

In other words, I'm wary that central banks get involved and there's a complete disconnect between oil price versus any sort of fundamentals. I'm not convinced that will happen, but it seems that other markets have completely lost track of real world reality so why would oil keep following fundamentals?

 

[aus_trader]

Within a year may be too optimistic, but longer term I think so based on the money printing experiment continuing as Smurf1976 also mentioned which will inflate limited supply/real assets like Oil over the long term when measured/valued in terms of possibly unlimited supply of paper asset like $.

 

[frugal.rock]

The majority of/ all new wells for oil and gas are fracked.
The US actually became a net exporter end of last year. That's probably tipped back, but that's the point they're at with emphasis on increasing export.

 

[aus_trader]

The majority of/ all new wells for oil and gas are fracked.
The US actually became a net exporter end of last year. That's probably tipped back, but that's the point they're at with emphasis on increasing export.

Problem I see for US is they won't make any profits if they are to sell their produced in Oil in their currency. They'll be lucky to get 50% of their money back on the $70+/barrel spent on production if sold on the open market.

They'll have to find another way to trade it e.g. in exchange for manufactured goods in China ?

 

[qldfrog]

The majority of/ all new wells for oil and gas are fracked.
The US actually became a net exporter end of last year. That's probably tipped back, but that's the point they're at with emphasis on increasing export.

US Fracking is basically a conversion of paper$ onto oil
Standard oil is search and exploration, setup of infrastructure, exploitation
Whereas fracking is an endless rapid circle of drilling sell and drill again.
So capital capital capital
Few if any company are/were making money, at best they could pay interest

 

[SnakeEyes26]

Can you hold OOO shares long term? If i buy OOO today, can i hold it for the next 5 years for example?

 

[qldfrog]

you could but realise even in POO going up, OOO could fall; these ETF are not done for long term or even medium term ownership; have a look at the GEAR thread for some understanding of the grinding effect the nature of these ETF leads to; I am no expert but definitively not a long term tool