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ETF Specialist

Betting on Oil

For better or for worse, exchange-traded products have made commodities markets more accessible to investors.


The collapse in oil prices in the back half of 2014 has prompted some bargain-hunters to take their chances bottom-fishing the volatile commodity. In just the past four months, exchange-traded products offering exposure to energy markets via futures contracts have attracted about $3.5 billion in asset flows. That figure represents a remarkable 80% of the $4.3 billion in total assets invested in the category as of the end of January.

There are currently 20 ETPs in the category, which is dominated by  United States Oil ETF (USO), which serves as a crude, but investable, proxy for the price of oil. Specifically, it follows a strategy of rolling the front-month futures contracts of West Texas Intermediate crude oil. Specifically, USO will hold the futures contracts due to expire at the end of the current month and roll its exposure into the next-month contract when the current-month contract is within two weeks of expiration.

John Gabriel does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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