Exchange traded oil funds play increasing role.. EIA

by Jim Colburn • Thursday, November 16, 2017

The EIA has an excellent piece in This Week in Petroleum on the role of ETF’s in oil markets here…  This chart shows how the CFTC categorizes different market players:

“The largest crude oil ETF by total assets is the United States Oil Fund (USOF). USOF’s objective is to track the daily percent changes in front-month WTI futures contracts before fees and expenses. As public interest in USOF has increased in recent years, it created more ETF shares for Authorized Participants to offer to the public for trading. USOF has approximately 200 million outstanding shares, 15 million of which trade daily (as of November 14, Figure 2). Because the value of the shares is backed by crude oil futures contracts, increases and decreases in the number of shares outstanding have a direct effect on the number of contracts the fund holds.”

The US Oil Fund is a “long only” strategy, so the rolls are selling the front month and buying the back month… A market in contango reduces returns of the fund (selling a lower price/buying a higher price):

The oil futures market has reached a new level of interest:

 

 

 

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