Top U.S. oil ETF plans to diversify investment in later-dated oil contracts

FILE PHOTO: Natural gasoline flares are seen at an oil pump web site outdoors of Williston, North Dakota March 11, 2013. REUTERS/Shannon Stapleton/File Photo

(Reuters) – The United States Oil Fund LP, the most important oil-focused exchange-traded product (ETP) within the nation, could start investing in oil futures contracts expiring in a number of months, relatively than simply the front-month and second-month contract, it mentioned in a submitting here on Wednesday.

USO mentioned it could make investments about 20% of its portfolio in crude oil futures contracts on the NYMEX and ICE platforms for June , about 50% in July , 20% in August CLc3 and 10% in September contracts .

U.S. crude markets have been roiled by oversupply and dwindling demand within the wake of diminished financial exercise because of the world coronavirus outbreak. Crude storage has grown scarce because of this. Nearer-term contracts are buying and selling at sharply decrease costs than later-dated ones, a departure from the norm.

On Monday, May U.S. crude futures settled beneath zero. USO was not holding these contracts on the time.

USO was final buying and selling 10.0% decrease at $2.53 regardless of front-month U.S. crude futures’ settling 19.1% greater, at $13.78 a barrel. The fund traded at a steep premium to its internet asset worth on Tuesday after it suspended the creation of latest shares.

Increasing its holdings of later-dated contracts might assist USO mitigate threat, however a persistent scarcity of oil storage capability might nonetheless push down costs of oil futures in addition to the ETPs that maintain them, analysts mentioned.

“There’s a good argument to say at some point oil prices should be negative,” mentioned David Miller, chief funding officer at Catalyst Funds. “There’s nothing ETPs can really do about that if that turns out to be the case.”

Reporting by Shariq Khan in Bengaluru and April Joyner in New York; Editing by Shounak Dasgupta and Leslie Adler


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