ETF Plays for a Rebound in Crude Oil Prices

“What’s more, the Brent futures curve has now flipped into backwardation for the first time in years, suggesting that the oil market is tightening and going toward re-balancing,” reports “The WTI futures curve is still in a state of contango–the opposite of backwardation.”

Related: Oil Exploration ETF Tries to Shake its Bearish Ways

Widening contango could eat away at long-term returns. Specifically, USO tracks near month crude oil futures, swapping out contracts within two weeks of expiration for the next month contract. Consequently, in a contangoed market, USO would essentially be selling low and buying high, which may cut into performance.

Investors interested in gaining exposure to the crude oil market can take a look at the recently launched ETFS Bloomberg Energy Commodity Longer Dated Strategy K-1 Free ETF (NYSEArca: BEF). BEF tries to provide long-term capital appreciation designed to exceed the performance of the Bloomberg Energy Index 3 Month Forward Index, which tracks movements in the prices of rolling positions in a basket of energy commodity futures with a maturity between 4 and 6 months.

For more news on oil ETFs, visit our oil category.