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SCO: More Supply Could Start To Weigh On Crude Prices


  • Crude oil was a top performing asset class in 2021. As a result, investors in SCO were punished severely.
  • Despite this backdrop, I think crude may be nearing a top, making short positions less risky now than they have been in recent past.
  • Demand could slow in the winter months, due to Covid-variants. This is because travel demand may come down, driven by pandemic restrictions.
  • OPEC+ continues to boost supply, and other developed nations are tapping SPRs to combat rising prices. This is bound to have some impact.
  • This idea was discussed in more depth with members of my private investing community, CEF/ETF Income Laboratory. Learn More »

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Main Thesis/Background

The purpose of this article is to discuss the ProShares UltraShort Bloomberg Crude Oil ETF (NYSEARCA:SCO) as an investment option at its current market price. SCO is a double short instrument, designed to return double the inverse

This article was written by

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I've been in the Financial Services sector since 2008, which gives me an invaluable insight in how markets can turn. I currently work for a large-cap US Bank in funds management. I was a D1 athlete in college (men's tennis) when I got my Finance degree. I received my MBA in 2013 in North Carolina.

My readers/followers can trust that I won't pump any investment nor discuss a topic I don't genuinely follow and research. In that spirit, I list my portfolio here for transparency

Broad market: VOO; DIA, RSP

Utilities: VPU, BUI 

Energy: VDE, RYE, IXC

Innovation: GINN, QQQ


Dividends: DGRO; SDY, SCHD

Municipals/Debt Funds: BGT, Individual muni issues (NC)


Cash position: 25%

Analyst’s Disclosure: I/we have a beneficial long position in the shares of VDE, IXC either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (4)

Is there any penalties or Cost of buying this and holding
Thank you for the article...

Has anyone traded large amounts of SCO, BOIL, or KOLD in an IRA, and had any trouble with UBTI on a K1 from these funds...

I have traded thousands of shares this year... hoping there are not any UBTI issues...
Others are saying oil will be 100-120 in 2022... And I agree, that no one is listening to government restrictions anymore... So everyone is traveling and getting together - back to normal type life style... So, oil will be volatile, but it is used for creating so many products - rubber, plastics, lubricants, fuel - and where is plastic used in? everything!
Two flaws.
No one is listening to government restrictions anymore and there is no more stimulus to entice people to stay home.

There is little spare capacity left until significant investment happens.
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