Crude oil and related exchange traded funds and products have languished recently, with crude trading at more than a one year low on Tuesday of this week.
On Wednesday, crude however was well bid throughout the day and related ETFs traded higher than average volumes.
U.S. Oil Fund (NYSEArca: USO) remains the giant in the space, with about $1.2 billion in assets under management, and average trading volume well over 12 million shares per day. However, many have criticized USO’s methodology in that it invests in crude oil futures in such a way that the fund can be negatively impacted by an environment of contango in the futures market itself. [Understanding Contango]
U.S. 12 Month Oil Fund (NYSEArca: USL) was designed to mitigate the effects of contango by taking a weighted blend of 12 futures contracts across the calendar as opposed to simply owning front month oil futures and then rolling them once per month (as in USO). Since inception in late 2007, USL is down 32.39% versus USO’s return of -57.32% during the same time period, so it is evident that USL’s methodology provides some alleviation of the negative effects of contango.
PowerShares DB Oil Fund (NYSEArca: DBO) is also a player in the space and invests in futures contracts on WTI Crude Oil based on a rules based index.
The iPath S&P GSCI Crude Oil (NYSEArca: OIL) is an exchange traded note that tracks the S&P GSCI Crude Oil Total Return Index, and obviously has different implications in investor portfolios simply due to its ETN structure whereas the products mentioned above are ETFs.