After shorting USO, I have now turned my sentiment around and am LONG on this ETF. Let me explain as I'm sure many people here would question my position.
1) The bottom I believe has been reached as we are seeing strong support in the $2.40-2.50s range. On Friday 24th, I saw extremely large blocks of USO being acquired - these were Hedge Funds buying. 2) The CME forced USO to change its Futures structure to go out several more months, stating they could not hold the majority of Futures for the 2 primary months out. Now why would they do that exactly? Because they know the market is going to turn around very soon in Oil Futures, and because someone was buying in, hmmm. 3) I saw an article on Friday evening stating that the TRUMP Admin will start buying Oil Futures and Securities in May to boost the price of Oil, also they are considering tariffs on Imported Oil coming, if production was not eased globally. This would be huge for the O&G industry, and I can tell you, that the FED is not going to let Saudi & Russia put 10's of millions of O&G jobs out. 4) Saudi and Russia already started lowering production in Oil, a full week before May, like they said they would. Also, another indication of what's coming. 5) New Shares restricted, and Reverse split. I actually, see these 2 things as positive for USO. For obvious reasons, they will be taking shares out of the market, and as Crude starts to climb its way back to the 30's, the Bulls will be buying in.
So, to conclude. I believe getting in before May 1 would be a great entry point, and riding it up until OIL gets back into the 30's would be the strategy. At that point, I will take another glance at everything and see where we're at, at that point. GL everyone.
JP - OUT
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Over the weekend, the Trump deal seemed to have (3). Now they are saying instead of buying Futures, they will go another route. I guess they figured out, that bailing the actual companies themselves would be the better method and less costly. The oil market may shift downward due to this. I am changing my outlook to Neutral now.
I believe all those intervention actions you stated above will come to pass. The problem, however, is none of those actions can counteract an 80% drop in oil demand which is the real dip we have created, not 30% as described by some media outlets. I exited all my oil shorts as well, but I am not going long. I think soon there will be mass chaos in this sector, including multiple weeks of below zero oil prices and complete closure of some ETFs like USO to protect the ETF issuers. This would be a game too chaotic for the likes of me. That said, good luck and I respect your courage.
jpreal1
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@supere, Thanks for your comment. That's some seriously dire forecasting there.
supere
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@jpreal1, Yup, it does sound like a dire tragedy but sometimes cannot avoid being hit in the face with reality. I think we are likely in the midst of an economic collapse that was coming anyway, and now it has been magnified megafold by COVID. There are many out there who hope that there is yet another "bandage quick fix" as central banks have done several times already this past decade, but I doubt they can patch this one with their smoke & mirror "debt" instruments. It could be... but i highly doubt it.
STalpur
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I don't think you understand how USO works. WTI June is down 15% today (40% of their holding), they will be dumping this soon, but it's still about a week out, to roll over to July. The June contract is 110% going negative before it closes. Trump won't pay more for oil than he has to, he has said he'll take all he can for free and charge the companies for storing it.
USO is going to 0. Reverse split won't save it, a reverse split does not make you money, yes value goes up, but you lose number of shares you have.
jpreal1
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@STalpur, I understand futures and RS very well, I'm not sure you understood my post, please re-read my post and comments. Evidently, things changed over the weekend and what was said on Friday evening by Trump has also changed.