Here's the Best Oil ETF to Buy in 2018, as Oil Prices Rise

Best Oil ETF to buy in 2018

In November 2017, OPEC announced plans to cut oil production by 2% through 2018. Speculators responded by driving oil futures up 10% in December.

But the best oil exchange-traded fund (ETF) to buy in 2018 has consistently outpaced oil prices, up 15% since Nov. 1 and over 30% since July 2017.

OPEC's production cuts are meant to curb oversupply and raise oil prices. The announcement was made even more significant after several nations outside OPEC agreed to participate in the reductive measure. The biggest addition was the Russian Federation, which is the largest global supplier of oil.

But that's not the only catalyst...

Mounting uncertainty over the political situation in Middle Eastern OPEC nations and supply issues in economically fragile South American countries like Venezuela have made banks increasingly bullish on oil prices...

According to a report by Citigroup Inc. (NYSE: C), geo-political upheaval could cut global production by more than 3 million barrels a day over the course of 2018. Citigroup states these threats could boost oil prices by over 30% before the end of the year.

As Money Morning Global Energy Strategist Dr. Kent Moors points out, global uncertainty about the direction of the oil prices remains at an all-time high despite the current enthusiasm building around lower global supply.

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If the price of oil suddenly drops, speculators invested directly in oil futures will have to give up additional funds to their brokers in order to insure their investment. This exposes investors to greater risk.

Fortunately, there is a way you can take advantage of the market's current enthusiasm in oil futures and limit your long-term risk exposure all at the same time...

The Best Oil ETF to Buy in 2018 Can Maximize Profits and Limit Risk

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Because ETFs allow an investor to "track" a specific sector of securities without directly investing in it, we can benefit from any spike in futures prices and limit our potential losses by avoiding the liabilities that come with futures contracts.

We can do this by investing in Powershares DB Oil ETF (NYSE: DBO), which tracks futures contracts for light sweet crude oil (WTI).

While there are several ETFs that track the prices of oil futures contracts, DBO regularly reassesses the contracts included in its portfolio to avoid a phenomenon known as "contango." This practice ensures that the ETF provides the most accurate reflection of the futures market and ensures a gain equal to that of the futures market when the price of contracts rise.

Since July, DBO has risen over 30%, an indication of the growing momentum surrounding oil futures. DBO also maintains a healthy average volume of over 492,000 shares per day.

Oil futures have a significant amount of momentum heading into 2018. If you want take advantage of the speculator's frenzy over rising oil prices while limiting your exposure, DBO offers one of the best and safest ways to do so.

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