U.S. Commodity Funds has added the word “diesel” to the name of its United States Diesel-Heating Oil Fund (UHN) in an effort to bring to investors’ attention that investing in heating oil is basically the same thing as investing in diesel.
That parity between the two fuels now rings more true than ever after the CME Group decided this spring to change the sulfur content specifications on its heating oil contract in an effort to allow heating oil futures to “serve as a dual-use price benchmark for both the heating oil and on-road diesel markets,” it said then.
The key differentiator between heating oil and diesel is sulfur levels, but for most people that dab into those energy markets, that’s almost negligible when it comes to pricing the fuels.
Heating oil, the oldest oil contract in the U.S.—dating back to the late 1970s—has also been used as a proxy for diesel prices for more than 35 years, U.S. Commodity Funds’ Chief Investment Officer John Hyland said.
Still, USCF is taking CME’s move as an opportunity to highlight the fact that one can get exposure to diesel prices through the heating oil futures market by changing UHN’s name.
“This name change will help investors understand that they have more energy investment options than they thought,” Hyland told IndexUniverse, noting that heating oil is a very liquid energy market, trading some $15 billion to $20 billion worth of contracts on a daily basis.
“Historically, the heating oil futures contract has been used by both industry and financial participants as a way to hedge or invest in exposure to diesel fuel due to the close physical similarities between the two products,” USCF said in paperwork it filed with U.S. regulators announcing the name change.
UHN’s name change in no way reflects any changes to the fund’s composition, methodology or objective. It doesn’t even affect its ticker.
The CME, which designed the contract that’s listed on the NYMEX, also added three years to the heating oil futures curve.
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