USO ETF No Longer Tracking WTI Crude Only

by TheOneAboveNone2

This is crazy, as of May 1st the USO Fund ETF is now branching out and putting funds into

  • Brent Crude
  • WTI Crude
  • US Diesel (Low Sulfur)
  • RBOB Gasoline
  • All spread across multiple months in 2020 AND 2021
  • Possibly Dubai, Singapore, other international crudes

This thing is so far off kilter, check it out: www.sec.gov/Archives/edgar/data/1327068/000117120020000330/0001171200-20-000330-index.htm

Accordingly, commencing on May 1, 2020 and for the foreseeable future, to address and comply with the market conditions, regulatory requirements and other factors that have influenced, and will continue to influence, its investment decisions, USO intends to buy or sell the following permitted investments taking into account the order set forth below when USO increases or decreases either its portfolio overall or its holdings of particular investments:

  1. The current or front month (“first month”) Oil Futures Contracts based on the price of the light, sweet crude oil known as West Texas Intermediate (“WTI) or, which are priced off of the oil futures contracts based on WTI as traded on the NYMEX including the Benchmark Oil Futures Contracts and the ICE WTI Contract (“WTI Oil Futures Contracts”); then
  2. The first month, the next or following month (“second month”, with months thereafter being numerically designated, i.e., the third month, the fourth month, the fifth month, etc.) and the third month WTI Oil Futures Contracts; then
  3. The first through the fifth month WTI Oil Futures Contracts, plus the next nearest June WTI Oil Futures Contracts, plus the next nearest December WTI Oil Futures Contracts; then
  4. The first through the twelfth month WTI Oil Futures Contracts; then
  5. The first through the twelfth month WTI Oil Futures Contracts plus the second through thirteenth month Oil Futures Contracts based on Brent Crude Oil traded on ICE Futures (“Brent Oil Futures Contracts”); then
  6. The first through the twelfth month WTI Oil Futures Contracts Months plus the second through thirteenth month Brent Oil Futures Contracts plus the first through the twelfth month Oil Futures Contracts based on Ultra Low Sulfur Diesel Oil Futures Contract traded on NYMEX (“USDL Oil Futures Contract”); then
  7. The first through the twelfth month WTI Oil Futures Contracts plus the second through thirteenth month Brent Oil Futures Contracts plus the first through the twelfth month USDL Oil Futures Contracts plus the first through the twelfth month RBOB Gasoline Oil Futures Contracts (“Gasoline Futures Contract”); then
  8. USO may also utilize the Oil Futures Contracts based on WTI, WTI Oil Futures Contacts or other types of crude oil traded on the Dubai, Singapore, and Houston exchanges, if and when these contracts reach sufficient scale and liquidity to meaningfully contribute to USO’s investment objective, in addition to the foregoing investments; then, finally,
  9. Other Oil-Related Investments, in addition to the foregoing investments.

What does this mean for you? Well these are all radically different markets (especially now) and this is actually WAY more conservative than even their USL fund. Which means any run up on WTI crude prices will see very little transfer to your USO gain. Basically the entire freaking curve has to move up at the same time if you want to make any money.

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So you open up and see the front-month WTI crude contract has shot through the roof on May 15th, you get all excited and can’t wait to sell out and rake in those sweet massive profits, only to see USO barely moved because all their positions are spread out across different crude grades and also gasoline and diesel prices!

So if you have calls, sorry to say your gains have now had their legs cut out from underneath them. You could be a 100% right on your WTI prediction but not see shit for gains. Haha remember when this was sold as a FRONT MONTH WTI CRUDE FUND. This doesn’t seem fair for anyone on either the call OR put side.

 

Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence.