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The Invesco DB Oil Fund ETF offers exposure to WTI oil futures market. A recent decline in oil prices is primarily due to reduced geopolitical risks in the Middle East. Investors may consider DBO in case of another round of escalation in the Middle East, but potential oversupply risks are substantial enough to avoid oil exposure in the medium term.
Tensions in the Middle East escalated on Wednesday following an Iranian missile attack on Israel, sparking demand for safe-haven assets as investors grew anxious about the potential expansion of the conflict.
Goldman Sachs believes that oil prices may surge ahead if Houthi attack continues, as quoted on oilprice.com.
2024 should provide new opportunities in the oil sector. Another year of volatility should give traders enough to work with.
A potential widening of the Israel-Hamas war is only one issue that could upend oil markets. South America and OPEC are also wild cards.
Subscribers to Chart of the Week received this commentary on Sunday, December 3.
The price of crude oil has fallen since its peak in September, potentially making the Invesco DB Oil Fund ETF an attractive short-term investment. The long-term outlook for DBO is not favorable due to increased oil production from non-OPEC countries and the global shift towards clean energy sources. The Fund has underperformed the S&P 500 over the last decade and does not offer any income stream to investors, making it a risky investment option.
Oil futures fell for a second straight session on Wednesday, with U.S. prices ending at their lowest since mid-July. The commodity was “hammered by demand concerns” after the American Petroleum Institute reported a huge rise in crude inventories in the week ended Nov. 3, said Lukman Otunuga, manager, market analysis at FXTM.
Oil futures finished lower on Monday, with U.S. prices at their lowest in more than three weeks. While the ongoing conflict between Israel and Hamas “will keep traders on their toes, they are also wary of the fact that so far, other oil-producing, Middle East countries have stayed away from getting dragged into the conflict,” said Fawad Razaqzada, market analyst at City Index and FOREX.com.
Oil prices settled lower on Wednesday, shaking off earlier gains fueled by a forecast from the International Energy Agency for potential global supply deficit in the fourth quarter. The latest U.S. inflation reading ran on the “hot side,” especially on the core figure, which will “bolster the case for a ‘higher for longer' Fed policy rate outlook, said Tyler Richey, co-editor of Sevens Report Research.
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