Olivier Jakob, managing director of Petromatrix, points out that USO’s WTI holdings are still short of its record of 96,523 contracts in 2009, compared to 61,793 contracts Tuesday, but it is still nine times higher year-over-year, according to the Financial Times.
USO has added over $2 billion in new assets this year, though much of that has come by way of short sellers opting to short USO rather than establish long positions in inverse oil ETFs.
As more people get into oil ETFs, new investors should understand the potential risks of trading futures-backed funds. Specifically, oil traders should be aware that USO tracks front-month WTI future contracts and the underlying oil market is currently in a state of contango. Consequently, USO could experience a negative roll yield when rolling a maturing futures contract.
U.S. Oil Fund
