The gasoline focused exchange traded fund United States Gasoline ETF (NYSEArca: UGA) was the third best-performing commodity fund in the third quarter, which isn’t good news for consumers who are feeling the pain at the pump.
The fund has gained about 25% year-to-date, and has rallied alongside gasoline prices that are up 24% this year. The ETF invests in futures contracts.
“Front month contracts shot up because Hurricane Isaac temporarily closed down more than one million barrels a day of Gulf Coast refinery output,” Tom Kloza, Chief Analyst at Oil Price Information Service, said in a report. “And there were refinery fires in California, Venezuela, and Canada, all of which happened in August.” [Gasoline ETF Rises 30% From June Low]
In total, U.S. gasoline stockpiles were down 9% year-over-year for the week ending September 21, according to the U.S. Energy Administration. Average prices at the pump are up 9% year-over-year for the week ending September 24, reports Trang Ho for Investor’s Business Daily. [Is Gas ETF Past Its Peak?]
UGA has benefited from the backwardation that occurs with futures trading. Front-month contracts cost more than later-month contracts, causing an ETF to sell the earlier contracts in place of the later ones for constant exposure and a profit is made. [ETF Chart of the Day: Gasoline]
UGA tracks unleaded gasoline futures and has $71 million in assets under management. About 50,000 shares trade on average, giving this fund enough liquidity. The fund costs 0.60%.