January 17, 2007
Using ETFs to Trade the Price of Oil
Last weekend I updated the list of ETFs I follow. There are now 379 (!) symbols in my ETF universe, but I only look closely at the 40 most liquid ones, which includes the US Oil Fund (USO). I discovered that there are now two other oil funds in addition to USO: iPath ETN Crude Oil (OIL), and PowerShares DB Oil Fund (DBO), which are both relatively thinly traded.
- United States Oil Fund
- iPath Goldman Sachs Crude Oil Total Return Index ETN
- PowerShares DB Oil Fund
“The investment objective of the United States Oil Fund is for changes in percentage terms of the units’ net asset value to reflect the changes in percentage terms of the spot price of West Texas Intermediate (‘WTI’) light, sweet crude oil delivered to Cushing, Oklahoma (‘WTI light, sweet crude oil’), less USOF’s expenses.”
“The iPath Goldman Sachs Crude Oil Total Return Index ETN is a subindex of the Goldman Sachs Commodity Index. The Goldman Sachs Crude Oil Total Return Index reflects the returns that are potentially available through an unleveraged investment in the West Texas Intermediate (WTI) crude oil futures contract plus the Treasury Bill rate of interest that could be earned on funds committed to the trading of the underlying contracts.”
“The PowerShares DB Oil Fund is based on the Deutsche Bank Liquid Commodity Index – Optimum Yield Oil Excess Return and managed by DB Commodity Services LLC. The Index is a rules-based index composed of futures contracts on Light Sweet Crude Oil (WTI) and is intended to reflect the performance of crude oil.”
Oil went to a new low today and USO was one of the top ten most actively traded ETFs.
Related: Oil Begins New Year with a Breakdown
Very Zen-like as if to embody the full spirit of a Daoist blogger…
January 17th, 2007 at 11:33 am
Zapata Blake from Jim Puplava’s Financial Sense Newshour mentioned how he had taken a leveraged long position in oil. He noted the record volumes in USO.
Something interesting is happening, will be a good one to follow to see how it develops, even though I don’t trade oil it’s something we all need to watch as traders I think.
January 17th, 2007 at 12:00 pm
Andrew: Never heard of Mr. Blake and since he’s fighting the tape he may end up in the same position his namesake did when meeting one of Carranza’s generals: trapped and dead.
In any event, USO is a very good day trading vehicle.
January 18th, 2007 at 7:41 am
Enjoyed the article. I’m a big ETF fan. Are you aware of any ETFs that would be specifically targeted to North American oil exploration? I happen to believe the consequences of the Iraq morass will be played out over several years if not decades and the value of reliable, North American exploration will benefit as a result. Thoughts?
January 18th, 2007 at 8:26 am
Ken: There are some oil exploration ETFs but I don’t think any of them specifically target North America… I could be wrong, I’m not a broker. But it’s another idea for one of the thousands of ETFs that are in registration.
January 18th, 2007 at 10:19 am
There a canadian oilsand ETF of some sort. Don’t know the symbol. I’d just buy SU myself.
January 18th, 2007 at 11:08 am
Brian: Is that ETF listed in Canada? Does Canada have ETFs? Does Canada have an exchange? (I’m joking on that last bit).
January 18th, 2007 at 11:27 am
Looks like it’s listed in Canada. I figured it’d be in the US by now. I bet it trades in lockstep with SU and all them and I wonder if paying a management fee is worth it. Anywho, there’s your oil in North America.
http://www.oilsandsindex.com/index.php
Disclosure: SU is my last, pry from my cold dead hands energy stock. I let the rest go.
January 18th, 2007 at 1:32 pm
Brian, I will be taking a look at SU. I previously owned some Canadian Southern Petroleum which had some oil sands interest. It hasn’t done as well as some of my other North American exploration stocks (e.g. TXCO has been pretty good) but I do think oil sands definitely has a future.