United States Oil Fund Says Don’t Blame The ETF For Big Oil Price Swings

oildrumUnited States Oil Fund (USO) said Friday that it shouldn’t be blamed for big swings in oil prices because its buying and selling of U.S. oil futures usually makes up just a small fraction of total market activity, according to a company filing.

The filing was in response to “recently published reports” alleging that commodity exchange-traded funds like USO might be to blame for big swings in oil prices. USO said its total buying or selling of U.S. crude futures averaged approximately $57 million a day between April 2006 and January of 2010, or around 0.1 percent of average daily activity.

“Management strongly believes that the net buying or selling activities of USO have not historically been of such size as to raise concerns about USO’s ability to impact the market,” the fund said in a filing.

Even on days when USO’s activity has been most intense, its daily unit creation or redemption activity — which is usually in line with the amount of single-month crude futures it would add or dump from its day-to-day volume in a single trading day — has never risen above around $314 million for creation or $326 million for redemption.

U.S. crude oil futures settled $1.95 a barrel, or nearly 3 percent, lower at $71.19 on Friday, after plunging 5 percent on Thursday in their biggest one-day percentage dip since July.

Funds like USO and United States Natural Gas Fund (UNG.P), both managed by the United States Commodity Funds, have grown over the past few years by attracting many retail investors to bet on the rising price of oil or natural gas futures.

Source: REUTERS

The investment (USO) seeks to reflect the performance, less expenses, of the spot price of West Texas Intermediate (WTI) light, sweet crude oil. The fund will invest in futures contracts for WTI light, sweet crude oil, other types of crude oil, heating oil, gasoline, natural gas and other petroleum based-fuels that are traded on exchanges. It may also invest in other oil interests such as cash-settled options on oil futures contracts, forward contracts for oil, and OTC transactions that are based on the price of oil.

TOP 10 HOLDINGS ( 162.74% OF TOTAL ASSETS)  
 
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F/C Ws Crude Future Sep09 N/A 12.33
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Fidelity Instl MM Fds Government I N/A 28.89
Goldman Sachs FS Government Sel N/A 22.73
Morgan Stanley Inst Liquidity Gov Inst N/A 11.11

Chart for United States Oil (USO)

 

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