ETFs, like UGA, that track front month contracts benefit from backwardation as they roll front month contracts to avoid physical delivery of the commodity. When the contract is about to expire, UGA sells the futures contract and buys a cheaper later-dated contract in a backwardated market at a profit. [How Contango Can Affect Your Commodity ETF]
Presumably, higher oil prices would further benefit UGA, leaving drivers to wonder what could have been for their wallets when crude prices were sliding.
“If demand does climb strongly this year, that could prop up oil prices, which dropped to 12-year lows last week. Gasoline inventories held in developed countries are above their levels of a year ago, according to IEA data, but are less elevated than stockpiles of crude oil and other petroleum products,” reports Barron’s.
United States Gasoline Fund