ProShares K-1 Free Crude Oil Strategy ETF

OILK

Market cap $63.4M

Global oil production has reached unprecedented levels, creating a widening gap between supply and demand. Non-OPEC+ countries, particularly those in the Americas, drive most expansion.

Crude oil was down 4% Sunday night, as OPEC once again announced a production increase, a move by OPEC that will eventually help US inflation, and give the Fed another reason to lower the fed funds rate. The 10-year annual return on the TLT is still negative, and has been for a year or so.

Oil ETFs gained about 4% last week. However, the outlook for 2025 does not appear too bullish.

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.

In the latest meeting, OPEC+ agreed to extend production cuts of 3.66 million barrels per day (bpd) until the end of 2025, along with prolonging cuts of 2.2 million bpd until September 2024.

Slowing manufacturing activity may instigate the Fed to cut interest rates earlier-than-expected. While this is a plus for oil ETFs, the U.S. government's efforts to keep oil prices low in the election year may not allow those ETFs to soar ahead.

Geopolitical risk, particularly involving Iran and Israel, could lead to a significant spike in oil prices and a risk-off period. The ProShares K-1 Free Crude Oil Strategy ETF offers investors exposure to oil futures without the complexities and tax implications of traditional trading. OILK's unique tax structure and investment strategy have been shown to yield higher returns compared to similar ETFs, but it may not closely track the spot price of crude oil.

Oil prices have been in great shape this year. If the Gaza truce takes time to materialize, the rally could prolong.

Goldman Sachs believes that oil prices may surge ahead if Houthi attack continues, as quoted on oilprice.com.

Red Sea serves as a critical transit route for oil. Consecutive Houthi attacks in this area for the past two months may boost these ETF areas.