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Frequent Contributor

Oil/WTI ETPs USO, USL

USO is a futures-based ETP that invests entirely in near/next-month oil/WTI futures. In the old days, it used to do the entire futures roll on a known date. Then, it changed to 4-day roll during announced date ranges. I was curious if today's crash in oil/WTI May 2020 contract had anything to with USO futures roll.

No.

It already did its roll from April 7-13 and after that time it has been in oil/WTI June 2020 contract.    http://www.uscfinvestments.com/resources-filings/commodities/uso

Its sister ETP USL holds oil/WTI contracts for the next 12 months. It did its roll on April 7 [it still does the entire roll on an announced date but there are a dozen different contracts].   http://www.uscfinvestments.com/resources-filings/commodities/usl

So, USO and USL didn't contribute to today's crash in oil/WTI May 2020 contract that led to negative prices [low -$40.32]. These are expiring tomorrow, Tuesday, April 21. I am sure that there would be an investidation by CFTC, etc.

Screenshot 2020-04-20 14.38.29.png

 

Edit/Add: There is an article in Forbes claiming that USO still held some oil/WTI May 2020 contracts that were liquidated today, but I don't see that in USO portfolio in the website. May be Forbes is confused about a USO SEC/Edgar filing on 4/16/20 about a change in policy [see the next post] that would require it to roll about 20% of existing oil/WTI June 2020 contracts to July 2020.   https://www.forbes.com/sites/jimcollins/2020/04/20/the-us-oil-etf-uso-is-the-culprit-behind-oils-mas...

USO Portfolio, 4/17/20   http://www.uscfinvestments.com/holdings/uso

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Frequent Contributor

Re: Oil/WTI ETPs USO, USL

USO also recently changed its policy to hold 80% or more in the near-month contract [vs 100%] up to the roll period and up to 20% in the subsequent month contract to meet regulatory requirements.    https://www.etf.com/sections/features-and-news/biggest-oil-etf-shakes-structure?nopaging=1

SEC Filing on 80%, 20% policy 4/16/20    https://www.sec.gov/ix?doc=/Archives/edgar/data/1327068/000117120020000242/i20244_uso-8k.htm

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Re: Oil/WTI ETPs USO, USL

i don't see what's there to investigate.  the May contract is negative because no one can take delivery.  the world is producing too much for the crashed consumption.  even after the OPEC+Russia limited curbs go into effect in May, there is simply too much oil.  any commodity based futures are physically delivered if not closed.  contango at its worst. 

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Re: Oil/WTI ETPs USO, USL

More filings by USO.

4/21/20 filing that it can invest in any future month, although it may invest primarily in the near-month up to the roll.   https://www.sec.gov/ix?doc=/Archives/edgar/data/1327068/000117120020000259/i20262_uso-8k.htm

4/21/20 filing for suspension of creation pending authorization of additional shares   https://www.sec.gov/ix?doc=/Archives/edgar/data/1327068/000117120020000256/i20259_uso-8k.htm

4/20/20 filing of additional shares,   https://www.sec.gov/Archives/edgar/data/1327068/000117120020000251/i20250_uso-s3.htm

Note that USO also changed advisor and custodian to BNY Mellon on 3/31/20.

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Frequent Contributor

Re: Oil/WTI ETPs USO, USL

Today’s WSJ has article on page B1 about how individual investors were burned by investing in USO despite warnings that USO is unsuitable for individual investors.

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Frequent Contributor

Re: Oil/WTI ETPs USO, USL

4/22/20. In another filing, USO announced reverse 1-for-8 split. Beware of reverse splits as they are done when an ETF or stock drops too much, and once below $5, it may not be held by institutions, or be marginable at some brokers [although some have $3 as threshold].   https://www.sec.gov/ix?doc=/Archives/edgar/data/1327068/000117120020000271/i20263_uso-8k.htm

News   https://www.cnbc.com/2020/04/22/the-oil-etf-trying-to-avoid-imploding-on-retail-investors-attempts-a...

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Frequent Contributor

Re: Oil/WTI ETPs USO, USL

There were more filings on 4/24/20 and 4/27/20 (today).

USO is changing yet again the number of months beyond the front-month for which it will hold oil/WTI future contracts - it has cited position limits imposed by the Exchange/Regulators [were they sleeping before?]. USO is also modifying [spreading out] its futures roll process. Its amended filing for additional shares is still pending with the SEC [who is taking its sweet time]. Shorts are circling USO and at some point it may just have to merge into its sister fund USL that holds futures contracts 12 months out. USO may become a casualty of Covid-19 and OPEC+ policies.

4/27/20 Filing   https://www.sec.gov/ix?doc=/Archives/edgar/data/1327068/000117120020000302/i20277_uso-8k.htm

A negative piece from CNBC    https://www.cnbc.com/2020/04/27/oil-etf-uso-dumps-plunging-june-oil-contract-as-cramer-says-hedge-fu...

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Frequent Contributor

Re: Oil/WTI ETPs USO, USL

CNBC reported that USO will sell all of its June contracts.  Cramer believes hedge funds want to crush USO.

none of this affects major oil co. CVX up 3% to 89.7.

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