The $1.2 billion United States Oil Fund (USO) is the biggest US oil ETF. Its rebooting its pre-pandemic investment strategy that drew the scrutiny of regulators and helped roil markets in 2020. In September it'll begin to back to allocating the majority of its holdings to the nearest oil futures contract, rather than spread exposure across the futures curve.
- the strategy was cited as a factor that contributed to the 2020 oil crash, exacerbating the volatility that followed.
- USO at the time had ballooned to more than $3 bn, at times holding 20% of all positions in near-term oil contracts
Bloomberg with the news, adding that:
- After the crash. CME Group Inc. ordered the fund to reallocate its funds across contracts.
- About 20% of USO's current holdings are invested in October 2023 contracts. 20% in November. 15% in December. 15% in January 2024 contracts. 10% in February, 5% in March. and 15% in June.
- USO said in a statement it retains the ability to invest in later-dated contracts and other products such as OTC swaps if market conditions, regulatory requirements or other factors require it.
