UCO ETF

With the Trans Mountain Pipeline expansion, WCS differentials have narrowed to near negative US$12, which is a US$7 improvement compared to Q1 2024. This partially offsets the impact of weaker oil prices, with 2H 2024 WTI strip at around $73 now. Baytex's Q1 2024 results were in line with expectations, and its full-year guidance remains unchanged.

Following the sharp sell-off over the past two trading sessions, we now see an imminent technical rebound in WTI crude that should present an attractive trading opportunity. Taking advantage of UCO's 2X leveraged exposure to WTI crude, we have previously demonstrated how we amplified returns on our bullish view in December 2022 and again in June 2023. Once again, we see current levels on WTI crude as a compelling opportunity to re-establish our bullish view. We expect prices to rebound forcefully over the next 1-3 months.

ProShares Ultra Bloomberg Crude Oil ETF is discussed as an investment option at its current market price. UCO is a high-risk, high-reward investment suitable for short-term trades only. I suggest taking profit and adopting a more neutral stance on UCO due to the recent gains and potential for volatility in the crude oil market.

ProShares Ultra Bloomberg Crude Oil ETF offers high-risk, high-reward speculation on oil without dealing with futures roll. UCO's performance may differ significantly from the spot price of WTI crude oil and is best suited for short-term traders. UCO's portfolio composition includes swaps with major financial institutions and its sector composition is singularly focused on the oil sector.

Oil prices plunged from over $95 to below $75 on the NYMEX futures contract. The U.S. administration's target buying zone for crude oil is at or below $67 to $72 per barrel. The OPEC+ meeting in late November may result in production cuts due to economic concerns and geopolitical tensions.

Oil name EQT Corp (EQT) pulled back after its recent Nov. 3 one-year high of $45.23, though support at the $39 level captured the dip.

Rising escalation in the Middle East could provide a powerful boost oil prices. I believe Israel's military actions in Gaza could lead to a broader Middle East confrontation involving the US and Iran. The current geopolitical landscape provides a short-term high-risk opportunity for oil bulls.

UCO is a double-long instrument that aims to return two times the daily performance of the Bloomberg Commodity Balanced WTI Crude Oil Index. ProShares Ultra Bloomberg Crude Oil ETF is a high-risk, high-reward investment option suitable for short-term trades. Recent performance and momentum in the oil market suggest that staying long on UCO could be profitable.

The recent performance of the ProShares Ultra Bloomberg Crude Oil ETF has surpassed our expectations, delivering a 29% gain since we re-established our bullish view on WTI crude. WTI crude has since fallen below our stop of US$82.60/bbl. Accordingly, we are taking profits on our bullish UCO position. More importantly, we are also downgrading our "Strong Buy" rating on UCO to "Hold," which reflects our neutral view on WTI crude for now.