Avoid This ETF as Oil Continues its Plunge.

Oil prices were down sharply on Sunday night. Markets responded to higher death rates in the United States. President Trump backed off his earlier comments and extended social distancing measures through April 30, blowing apart his “hopeful” Easter target. This means huge sections of the economy will remain in a virtual standstill for another month, at the very least.

The price of WTI Crude was down to $20.40 at the time of this writing. Western Canadian Select (WCS) had plunged 15% to $6.11, putting more pressure on the beleaguered domestic oil sector.

These are some of the reasons I’m avoiding the BMO Equal Weight Oil & Gas Index ETF (TSX:ZEO) right now. Shares of the ETF have plunged 49% month-over-month as of close on March 27.

Some of the top holdings in the ETF include Canadian Natural Resources, Enbridge, Suncor Energy, and TC Energy Corporation. Canadian crude collapsed to under US$5 a barrel on March 27.

The oil patch is awaiting a federal bailout that will run well into the tens of billions. There are speculations that its structure could mimic the Trouble Asset Relief Program (TARP) bailout of the U.S. auto industry during the 2007-2008 financial crisis.

Analysts are forecasting major production cuts in the weeks to come as companies wrestle with cratering prices. The federal bailout should provide a life preserver in the near term, but there is too much carnage in this sector for me to jump in on an ETF that offers broad exposure.