Be Careful With Imminent Oil Catalyst

Related: Tests Loom for Energy ETFs as Exxon Mobil, Chevron Deliver Earnings

Oil traders should be aware that the holdings of ETFs like USO’s underlying portfolio includes front-month WTI future contracts, and the oil futures market is currently in a state of contango. Consequently, USO could experience a negative roll yield when rolling a maturing futures contract for next month’s contract.

“The case for higher oil prices was predicated on Baghdad and Erbil heading for a lengthy and potentially violent standoff. With the pipeline controlled by the Iraqi government still unrepaired after suffering damage from ISIS years ago, oil flows will need to continue to run through the Kurdish pipeline,” notes

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