What’s the Relation between MLP ETFs and USO?



WTI and USO price movements

As we noted in the first part of this series, WTI (West Texas Intermediate) crude oil prices fell by ~0.8% in the week ending November 20, 2015—compared to the previous week ending November 13. The prices fell due to oversupply concerns and the strong dollar. The US crude oil benchmark ETFs like the United States Oil ETF (USO) fell by 0.99% in the week ending November 20—compared to the previous week ending November 13, 2015.

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ETFs and crude oil prices

Retail and small investors won’t get easy access to the futures market. So, the United States Oil Fund LP ETF (USO) gives traders room for investments in the crude oil segment. USO tracks the price movements of WTI crude oil.

As you can see in the above graph, USO and WTI crude oil futures were steady at the beginning of the week. However, they started underperforming WTI in the middle of the week. USO fell more compared to WTI crude oil futures prices.

Energy sector investors can also invest in MLP ETFs like the Alerian MLP ETF (AMLP). Their prices are mainly influenced by crude oil prices. The ETFs hold investments from logistics operators in the crude oil segment. The revenue depends on crude oil producers’ production volume like Apache (APA), Hess (HES), Oasis Petroleum (OAS), Anadarko Petroleum (APC), and ConocoPhillips (COP). These crude oil producers’ production volumes depend on crude oil prices. So, investors should also look at MLPs.


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