Oil prices declined this past week, with Brent crude 0.3% lower and West Texas Intermediate crude down by nearly 3%.
The decline came amid more questions and outrage regarding the death of journalist Jamal Khashoggi. Saudi Arabia announced late Friday that the dissident Saudi journalist was dead and that 18 Saudis have been arrested, according to the New York Times.
President Trump acknowledged on Thursday that Khashoggi had been killed. Turkish officials have said that Khashoggi was assassinated, according to the Times.
Crude oil prices have remained close to $80 per barrel since Khashoggi was first reported missing after entering the Saudi Consulate in Istanbul on Oct. 2.
Several U.S. government officials and CEOs of major financial institutions recently cancelled their participation in next week's Saudi-sponsored Future Investment Initiative , a leading investment forum dubbed "Davos of the Desert."
However, a notable participant from the energy world attending this year's FII is Jeremy Weir, executive chairman and CEO of Trafigura Group Ltd., who recently forecasted that he wouldn't be surprised to see oil trading beyond $100 per barrel in 2019.
We don't disagree with that view and we think the best way to express a long position in crude oil is via the United States Oil Fund (USO) or long-dated, out of the money calls options on the USO, such as the Jan $20 USO calls.
Trafigura has a long-term long view in the crude oil market as it is in the process of obtaining a permit to build a crude oil loading terminal in the Port of Corpus Christi so it can load up to 500,000 barrels per day into Very Large Crude Carriers (VLCC). Trafigura is betting that it will be able to accelerate the trading of Permian-sourced crude oil into the global markets. With a strong position in the U.S., they're the most bullish of all traders.
An alternative trade to long positions in USO is to buy the SPDR Exploration & Production ETF (XOP) , which is a proxy for the mid- and small-cap shale producers in the United States. We think the companies in the XOP would greatly benefit from an increase in crude oil prices as their revenues heavily exposed to energy commodities.