14 Nov

How Oil ETFs Are Reacting to Oil’s Rise

WRITTEN BY Rabindra Samanta


Between November 3 and November 10, 2017, the United States Oil Fund LP (USO) rose 2.1%, only ten basis points above the gain in US crude oil December futures. USO’s objective is to follow US crude oil near-month futures.

How Oil ETFs Are Reacting to Oil’s Rise

The United States 12-Month Oil Fund ETF (USL), which aims to follow US crude oil futures contracts for the next 12 months from the near-month futures contracts, rose 2.9% during this period.

However, the ProShares Ultra Bloomberg Crude Oil ETF (UCO) has produced twice the returns of US crude oil active futures. UCO rose 4.2% during this period and was the outperformer on our list of oil ETFs.

February 2016

On February 11, 2016, US crude oil (DBO) (OIIL) active futures were at their lowest in the last 12 years. Between February 11, 2016, and November 10, 2017, US crude oil active futures rose more than twofold. However, USO, USL, and UCO rose 42.9%, 40.8%, and 63.4%, respectively, during this period.

The negative roll yield could have limited the upside in these ETFs. The two consecutive futures contracts’ price difference could be the main factor behind the roll yield. So, if active futures are priced lower than the following month’s contract, then these ETFs could incur a loss.

For UCO, the compounding of its daily price variation over a long-term period could cause a deviation between its actual return and its expected return.

On November 10, 2017, US crude oil futures contracts prices as of April 2018 are in ascending order. Read Futures Spread: Is the Oil Market Tightening for more information.

Latest articles

Broadcom (AVGO) stock fell ~8.5% after markets closed yesterday following the semiconductor giant's fiscal 2019 second-quarter earnings release. It missed analysts' revenue estimate and cut its fiscal 2019 revenue guidance by $2 billion to $22.5 billion due to sluggishness in its semiconductor solutions business.

The SPDR Gold Shares ETF (GLD), which tracks physical gold prices, has underperformed the broader markets year-to-date, rising just 4.4% compared to the S&P 500’s (SPY) gain of 15.9% as of June 14. The sentiment for gold, however, has been turning around.

Safe havens such as Treasuries and gold were back in favor on June 14 as stocks fell due to rising tensions in the Middle East, concerns over growth, and the looming threat of the US-China trade war. The tech-heavy Nasdaq Composite Index fell 0.67% in the first hour of trading.

Lululemon (LULU) stock rose 2.1% on June 13 in reaction to better-than-expected first-quarter results and an upgraded outlook for fiscal 2019 overall. The company's first-quarter adjusted EPS grew 34.5% to $0.74 on revenue growth of 20.4% to $782.32 million. Analysts had expected EPS of $0.70 and revenue of $755.31 million. Here's why the outlook got an upgrade.

14 Jun

IEA Again Slashes Its Oil Demand Growth Estimate

WRITTEN BY Rabindra Samanta

As of 4:40 AM Eastern Time today, US crude oil active futures were at $51.83, ~4% below their closing level in the previous week. If US crude oil prices stay at those levels today, they'll mark their third week of decline in five weeks.

Amazon is discontinuing its Amazon Restaurants service, which has been delivering food for restaurants in parts of the United States. Amazon Restaurants launched in the United States in 2015 and entered the British market the following year. However, it met strong opposition in the British market.