Gas prices rose every day from Jan. 17 through Feb. 20, fueling the rally in U.S. Gasoline Fund (NYSEArca: UGA) to its highest level since 2008.
“Drivers in the U.S. should expect to see a ‘modest further increase’ in gasoline prices at the pump as refinery outages cut supply and plants begin making more expensive summer-grade fuels,” Bloomberg reported Friday.
UGA has an expense ratio of 0.60%. Averaging only about 28,000 shares on a daily basis, and having a desired goal of tracking the price of gasoline measured by futures contracts traded on the NYMEX, this relatively small fund only has $64 million in assets under management at the moment.
UGA employs a strategy that involves purchasing near month gasoline futures except when the near month contract is within two weeks of expiration (where UGA will instead purchase the next month on the expiration calendar).
The product is likely attractive to commodity based tactical managers as well as institutional hedgers, whom may see negative “bottom line” repercussions in their lines of business should Gasoline prices spike to a significant degree.