United States 12 Month Oil Fund LP (USL) Options

What tracks oil?

ETF's are on of my favorite ways to gain exposure to the oil sector. The investment objective of USL is to have the changes in percentage terms of the units' net asset value reflect the changes in percentage terms of the price of light, sweet crude oil, as measured by the changes in the average of the prices of 12 futures contracts on crude oil traded on the New York Mercantile Exchange.

West Texas Intermediate

Also known as Texas light sweet crude oil, West Texas Intermediate (WTI) is a type of crude oil used as a benchmark in oil pricing and serves as the underlying commodity on NYMEX oil futures contracts. WTI is primarily refined in the Midwest and Gulf Coast regions of the U.S., and maintains its price settlement point in Cushing, Oklahoma [see Oil ETF Gets Boost From IEA Report].

WTI is lighter and sweeter then Brent crude, and generally is $1 more expensive than Brent (and $2 more expensive than the OPEC Reference Basket, a weighted average of oil blends from OPEC countries).

ETFs offering exposure to WTI include:

United States 12 Month Oil (USL): This ETF also invests in WTI futures, but spreads exposure across various maturities instead of investing exclusively in front month contracts. That potentially reduces the impact of contango, but also makes the fund less sensitive to changes in the spot price [also see What Oil ETF Cash Flows Tell Us About Crude Prices].

http://etfdb.com/2010/oil-etf-investing-five-ways-to-play/

OPEC's August Output Quota Compliance 53%, Unchanged From July, IEA Says
By Nidaa Bakhsh - Sep 10, 2010 4:30 AM ET
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Business ExchangeTwitterDeliciousDiggFacebookLinkedInNewsvinePropellerYahoo! BuzzPrint OPEC’s compliance with record supply cuts was unchanged in August as increased output from Angola and Iran offset lower production from Nigeria and the United Arab Emirates, the International Energy Agency said.

The 11 members bound by quotas kept output at 26.8 million barrels a day last month, implying compliance of 53 percent, the Paris-based IEA said today in its monthly report. Supplies from all 12 nations, including Iraq, fell 0.2 percent to average 29.15 million barrels daily.

The Organization of Petroleum Exporting Countries, responsible for about 40 percent of world crude oil supply, announced a record limit on production in December 2008 as global demand collapsed. The group’s adherence to the cut of 4.2 million barrels a day, capping output at 24.845 million, slipped as prices rebounded 78 percent last year.

The compliance percentages are calculated based on the 11 nations targeting a 4.2 million barrel-a-day reduction from a base production rate of 29.045 million barrels a day in September 2008.

Angolan supplies rose by 50,000 barrels a day to 1.79 million barrels after Total SA resumed operations from its Girassol field, according to the IEA. Angola and Nigeria were the least compliant with their individual quotas, failing to implement any of the agreed supply cuts.

Sabotage

Nigerian output declined by 20,000 barrels a day to 2.14 million last month “due to sabotage,” the agency said. Royal Dutch Shell Plc declared force majeure on Bonny Light oil exports in August and September because of theft, the company said on Aug. 18.

Saudi Arabia, OPEC’s largest producer and the member conforming best with output cuts, kept production at 8.28 million barrels a day, unchanged from July, the IEA said.

OPEC’s 12 members are Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela. Iraq is exempt from the quota system. Force majeure is a legal clause that allows producers to miss export obligations because of circumstances beyond their control.

still unclear the direction

Let's compare again...

http://stockcharts.com/charts/performance/perf.html?uso, usl

NO... USO is better.. lol

back and forth...

Just me.. better then USO

no etf seem to follow spot oil

I think this one going down....

Still here

Hello!

12 Futures don't follow WTIC spot price!

In the moment

Added some performance charts to compare to USO, UCO and $wtic

LOL... yep

The player's took notice............
Kind of like chumming for sharks!

No doubt what you said was reason...

I would appreciate your opinion on oil prices.. Thanks!

http://investorshub.advfn.com/boards/board_surveymenu.asp?board_id=5547

Article dated Feb 9,2009.........
Volume jumped that day........
This board my pick up some.....

Hey Giff,
Stopped by your board after reading this from
Langlui's Big Board and Options Plays

Don't Buy USO (Buy USL Instead)

http://www.indexuniverse.com/blog/5362-uso-oil-usl.html

Written by Matthew Hougan
Monday, 09 February 2009 07:59

Investors are pouring money into the United States Oil Fund right now. They must be out of their minds.

I have nothing against people wanting to buy oil at $40/barrel. That's a cheap price, and there's reason to believe that spot crude may rise over the next six-to-twelve months. OPEC appears to be sticking by its production cuts, overall supply is down and it feels like the global economy may be leveling off. Oil could easily go to $50/barrel, which would be a 25% jump from here. Where else in today's market are you going to get that kind of return?

But if you want to profit from that rise, USO isn't the way to do it.

This is a big deal. According to the Wall Street Journal, investors poured $3.46 billion in new money into the U.S. Oil Fund (NYSE Arca: USO) in December and January. That makes my hair stand on end, because those investors have gotten crushed. And if things stay the way they are today, they're going to continue to get crushed.

The reason, as I've written about time and time again, is contango. The oil market is in violent contango right now. All else being equal, any strategy that focuses on buying the front-month futures contract and rolling it forward is going to lose money. A lot of money.

This is simple mathematics, and it pains me that people are missing the story.

Here are the current prices for oil contracts with expirations in the next six months. Notice how every contract is more expensive than the one that preceded it. USO follows a simple strategy of buying the current contract and then rolling into the next contract before the current one expires.



March 2009


$40.42

April 2009


$46.22

May 2009


$48.88

June 2009


$50.45

July 2009


$51.28

August 2009


$52.70

Source: NYMEX. Data as of 2/9/08.



Until last Friday, USO owned the March 2009 contract. Specifically, it owned 84,378 March contracts, entitling it to 84.4 million barrels of oil.

But on Friday, it sold all those contracts and bought the April contract instead. But because the April contract cost $6/barrel more than the March contract, it couldn't afford as many contracts. In fact, if you exclude new inflows into the fund, it could only buy 73,444 April contracts.

Whammo presto, the holders of USO lost 13.4% of their exposure to crude oil. They now control less oil. If the spot price stays near $40/barrel, the value of those April contracts will decay back to $40/barrel over the next month and investors will lose their shirts. If the price of oil jumps 15% in the next month—before USO rolls again into the May contract—investors will only break even.

This contango effect killed oil investors in January, according to Standard and Poor's, which runs the most important commodity index in the world.

"The steep contango in the WTI crude oil futures market (when further-out futures trade at a premium) was the primary factor causing the S&P GSCI Crude Oil Index to decline 18.90% in January. The spot price of crude oil dropped 6.55% on the month, but rolling from the February to the March future contacts accounted for most of the remaining 12.35% of the decline in the component index."

Got it? Contango cost you 12% in January. And it's worse now.

What's so horrible about watching people plow their money into an investment that they don't understand is that there are so many nice, viable alternatives out there.

The same company that offers USO offers a great little fund called the U.S. 12-Month Oil Fund (NYSE Arca: USL). Rather than simply holding the near-month futures contract, USL holds equal positions in each of the next 12 months' worth of futures contracts. Spreading out its bets like that helps minimize contango, which tends to be worse in the near-month contract, and gives you more direct exposure to the spot price of crude.

Not surprisingly, over the past three months, USL has outperformed USO by 13%

Big volumes coming in now...

continues to outperform

Still here

I wonder if that places it closer to the futures prices? Less gap like USO?

I'd love to get raw data...

I'm to cheap to pay for it...
http://sites3.barchart.com/pl/vsn/default.asp?code=XVSN§ion=energies

USL currently has a short-term performance edge...

USL vs USO

http://finance.yahoo.com/q/bc?s=USL&t=6m&l=on&z=m&q=l&c=uso

Currently very thinly traded...