The spot price for WTI crude oil jumped almost 70% in 2021, translating to strength in oil services that could bolster opportunities in the Direxion Daily Oil Services Bull 2X Shares (ONG).
Rather than play the volatility in oil prices, ONG can capture upside in the ancillary services related to oil. Traders can also amplify their bullishness with double the gains given the fund’s 200% exposure to its index.
Building off a strong year in 2021, 2022 could see another solid year with more exploration and production.
“With oil prices up about 12% so far this year after soaring 55% in 2021, a growing number of exploration and production (E&P) firms plan to raise spending for a second consecutive year in 2022,” a Reuters report says. “The rig count has climbed gradually for a record 17 months in a row, but U.S. oil production slipped in 2021 as many energy firms focused more on returning money to investors rather than boosting output.”
“U.S. oil output was hit by the coronavirus pandemic which crushed demand and prices, and is only forecast to surpass 2019’s record levels of 12.3 million barrels per day (bpd) next year,” the report adds. “The government projects production will rise from 11.2 million bpd in 2021 to 11.8 million bpd in 2022 and 12.4 million bpd in 2023.”
Leveraging Strength in Oil Services
As for the newly launched ONG ETF, the MVIS US Listed Oil Services 25 Index tracks the performance of the largest and most liquid companies in the oil services industry that are listed in the United States. This is a modified market cap-weighted index and only includes companies that generate 50% of their revenue from oil equipment, oil services, or oil drilling.
The index tracks the 25 largest and most heavily-traded oil service companies. Companies must generate at least 50% of their revenues from oil services, and given the market outlook for 2022, it should provide traders with plenty of opportunities to scalp profits.
“The oilfield services industry is on the verge of experiencing a ‘strong multi-year upcycle,’ Schlumberger chief executive officer Olivier Le Peuch said during the company’s fourth quarter 2021 earnings call Friday,” an Upstream article notes. “Le Peuch said a combination of demand growth that should surpass the pre-Covid peak, tight supplies and declining inventories have already led to an increase in planned capital spending by producers in 2022.”
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