ETF Chart of the Day: Crude Leverage

Don’t look now but Crude Oil seems poised to break out at current levels, and for reference’s sake one can look to the largest Crude Oil trackers in ETP land like USO (U.S. Oil Fund, Expense Ratio 0.45%, $3 billion in AUM), OIL (iPath S&P GSCI Crude Oil Total Return ETN, Expense Ratio 0.75%, $1 billion in AUM), DBO (PowerShares DB Oil Fund, Expense Ratio 0.75%, $609 million in AUM) for the consolidation that has taken place in the space since mid-March lows.

USO, OIL, and DBO alike are all above or at their 50 day Moving Averages at this point on heavier than average volume. USO and DBO are both structured as ETFs while OIL is of course an ETN, and we also tend to monitor
USL (U.S. 12 Month Oil Fund, Expense Ratio 0.88%, $72 million in AUM), BNO (U.S. Brent Oil Fund, Expense Ratio 0.90%, $108 million in AUM), as the most important funds in the space.

USO, in spite of its much publicized flaws in terms of contango in the futures market potentially hurting fund returns over time, has pulled in >$1.7 billion in fresh new assets just year to date and trading volume throughout the month of March was basically well above average day after day with few exceptions, remains the largest “Long Crude Oil” ETP in the U.S. listed landscape and we suspect the optionality and rather liquid options market in USO helps this cause and explains why some of the other funds in the space that may be designed with more foresight.

USL for example, have not quite caught on as some would have suspected they would even over time. In addition to the long, unleveraged ETPs in the Crude Oil space, it is hard to ignore the fast moving UWTI (VelocityShares 3X Long Crude ETN, Expense Ratio 1.35%) which in spite of its high $2 handle, has attracted an impressive >$775 million in new assets just year to date with very heavy trading volume for the past month relative to its norms.

This fund challenges UCO (ProShares Ultra Bloomberg Crude Oil, Expense Ratio 0.95%) which is an ETF unlike UWTI (an ETN), but UCO is designed to provide two times the daily return of a Crude Oil linked index instead of the three times daily returns that UWTI offers. Of course, if Crude Oil has any legs here and perhaps continues to rally several months out, UGA (U.S. Gasoline Fund, Expense Ratio 0.60%) which remains somewhat small with only
$90.2 million in AUM) may hit more radars as well.