Behind Oil
The ETF’s performance is trailing oil because the market is in contango, meaning futures for delivery in later months trade higher than nearby contracts. The structure erodes gains as the ETF sells the expiring contract and buys the more expensive next-month futures.
The iPath S&P GSCI Crude Oil Total Return Index ETN and ProShares Ultra Bloomberg Crude Oil, the second and third- largest U.S. oil exchange-traded products, also had outflows this month and in April. Investors pulled money out of ETFs that focus on energy stocks such as Exxon Mobil Corp. in May for the first time in eight months.
A total of $368.4 million has been withdrawn from the U.S. Oil Fund this month, following $591.6 million in April, the biggest single-month outflow since April 2011. Total assets are now $2.28 billion, down from $3.25 billion on March 26.
Crude Declines
The 2011 outflow was followed by a drop of as much as $17.02 in WTI prices. When the fund had a two-month withdrawal of $1.44 billion in May and June 2009, WTI also fell. Not all outflows from the ETF were followed by declines in oil prices.
About $2.86 billion was poured into the U.S. Oil Fund in the six months ended March 31 as oil slumped. The rebound in prices has given ETF investors an opportunity to reap profit, said Matt Hougan, chief executive officer of San Francisco-based research firm ETF.com.
“Investors were anticipating a bounce and they started selling as soon as it happened,” he said in an e-mail Thursday. “People are cashing in some of their short-term chips.”