Since USO needs to roll contracts upon expiry, the ETF will be subject to contango issues – near month March 2016 contracts trade at $29.12 while next month April 2016 contracts trade at $31.22, according to CME Group. Consequently, more sophisticated traders may short USO and go long later-dated futures to take advantage of the arbitrage opportunity when the fund rolls its contracts. [Positioning for an Oil ETF Rebound? Watch For Contango.]
Some observers also question the integrity of the countries as some have been known to deviate from the agreements – Russia failed to respect a similar agreement with OPEC producers in the 1990s. Due to the surge in popularity, the oil-related ETFs now hold a huge stake in the energy markets. For instance, USO now makes up a quarter of all contracts for April delivery on the New York Mercantile Exchange.
United States Oil Fund
