[pb_2_au]

I need help understanding the performance of USO, which has been worse than the spot price of crude.

I have charted the two side by side, so below find a 2 month version I was looking at. It's a very crude chart (HAHA) but something is jumping out at me, which is that the price of USO deteriorates more and appreciates less than WTI crude price it is supposedly based on.

For example on the chart you can see on the WTI chart a Sept 18 price of 64.5 and Oct 16 price of 61.5 this is a 4.5% loss. On the USO chart the prices are 58.25 and 54.5 respectively which is a 6.5% loss. If you extend this to early Nov you've realized a 10% loss on WTI spot and 11.5% on USO

The whopper is recent action which is what made me really take notice and look into what had been a gut feeling:
From the low during the first week of Nov to last week's low on WTI the price is UP, whereas for the same period the USO price is DOWN.

Perhaps the explanation is in the next month's future price and contango and backwardization and rolling one month's contract to the next, perhaps I'm comparing apples to oranges. I just get the feeling, USO is not doing what it's supposed to: track the price of crude, and my question is: are the concerns many aired about USO's model coming to bear (haha).
So can anyone help? I know there are other USO investors on this board who should be interested.

[pup55]

$this->bbcode_second_pass_quote('', 'U')SOF will invest in futures contracts for West Texas Intermediate light, sweet crude oil, other types of crude oil, heating oil, gasoline, natural gas, and other petroleum-based fuels that are traded on the New York Mercantile Exchange or other United States and foreign exchanges

[teemu]

$this->bbcode_second_pass_quote('pb_2_au', 'P')erhaps the explanation is in the next month's future price and contango and backwardization and rolling one month's contract to the next

[lowem]

I don't think USO is a very good buy. Besides the obvious out-of-sync issue with the WTIC, there's also not much daily volume. I've looked at it briefly in the past, but have taken it off my watchlist already.

Also considering DBC. Monitoring for an entry point.

[MrBill]

$this->bbcode_second_pass_quote('teemu', '')$this->bbcode_second_pass_quote('pb_2_au', 'P')erhaps the explanation is in the next month's future price and contango and backwardization and rolling one month's contract to the next

[atari2601]

Very interesting discussion going here! I've been pondering the economics of peak oil for about two years now, but up until today had no idea there were others actually discussing this in a public setting.

For others on the board investing with peak oil in mind, where are you putting your money? I'm looking for an investment vehicle with a high "gearing" relative to a rising crude oil price. I explored buying call options on oil itself but the account minimums and option prices were too high for me, a young investor. I considered USO like others in this thread, but also noted it failing to keep up with crude oil.

Canadian energy trusts look promising, but I'm unsure with their complex price hedging how they would respond to a truly rapid rise in the price of crude. That leaves big oil like Exxon and Conoco-Phillips. Are they the best investment at this point?

Thanks for any ideas you have!

Tim - Wilmington, NC, USA

[MrBill]

$this->bbcode_second_pass_quote('atari2601', 'V')ery interesting discussion going here! I've been pondering the economics of peak oil for about two years now, but up until today had no idea there were others actually discussing this in a public setting.

For others on the board investing with peak oil in mind, where are you putting your money? I'm looking for an investment vehicle with a high "gearing" relative to a rising crude oil price. I explored buying call options on oil itself but the account minimums and option prices were too high for me, a young investor. I considered USO like others in this thread, but also noted it failing to keep up with crude oil.

Canadian energy trusts look promising, but I'm unsure with their complex price hedging how they would respond to a truly rapid rise in the price of crude. That leaves big oil like Exxon and Conoco-Phillips. Are they the best investment at this point?

Thanks for any ideas you have!

Tim - Wilmington, NC, USA

[teemu]

$this->bbcode_second_pass_quote('MrBill', 'I') cannot see that DBC is any different even if they sell 2nd against 3rd month or 3rd against 4th for example? The long only and contango factors do not change. And the funds cannot go short.

[MrBill]

$this->bbcode_second_pass_quote('teemu', '')$this->bbcode_second_pass_quote('MrBill', 'I') cannot see that DBC is any different even if they sell 2nd against 3rd month or 3rd against 4th for example? The long only and contango factors do not change. And the funds cannot go short.

[teemu]

$this->bbcode_second_pass_quote('MrBill', 'I')f you are going to take one year or multi-year punts on the direction of crude then you need at least a one year lock-up period as well. Something many private funds have, but not ETFs.