The most traded U.S.-listed oil exchange-traded funds opened higher on Tuesday, closely tracking a small rise in oil futures, as investors weigh Venezuela’s short-term supply and hedge exposure to the crude futures through the ETFs.
United States Oil Fund (NYSEARCA: USO) was up by 0.56% as of 9:35 a.m. ET on Tuesday, mirroring a 0.7% increase in front-month crude oil futures.
United States Brent Oil Fund (NYSEARCA: BNO) gained 0.54%, Invesco DB Oil Fund (NYSEARCA: DBO) was up 0.65%, and ProShares Ultra Bloomberg Crude Oil (NYSEARCA: UCO) traded 0.5% higher.
Meanwhile, the U.S. benchmark crude futures, WTI, were up by 0.7% at $58.69 per barrel, and the Brent futures also traded 0.7% higher at $62.16 a barrel.
Oil prices rose early on Tuesday, reversing earlier losses in Asian trade, as investors weigh the numerous uncertainties about a quick rebound of Venezuela’s oil production following the capture of Nicolas Maduro by U.S. forces.
Immediate supply from Venezuela is actually down, as state oil firm PDVSA has been reportedly forced to cut oil production due to the U.S. oil embargo on the country and the continued naval blockade to prevent sanctioned tankers from delivering Venezuelan oil.
“Venezuela does not mean more oil supply – at least not anytime soon,” Ole Hansen, Head of Commodity Strategy at Saxo Bank, said in a note on Monday, amid the enthusiasm that the U.S. Administration has signaled about American companies – other than Chevron – returning to pump oil in Venezuela.
“Venezuelan supply losses are real and immediate, offering short-term support to crude prices despite a soft global balance,” Hansen noted.
The touted recovery of Venezuela’s oil industry will take years and potentially more than $100 billion of investments, analysts say.
“The market is not pricing a fast supply comeback, and for good reason: rebuilding Venezuela’s oil sector would take years and tens of billions of dollars,” Saxo Bank’s Hansen said.
By Michael Kern for Oilprice.com
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