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WTI Linked ETF Slips to Four-Month Low on U.S. Oil Boom


The commodity exchange traded fund tied to West Texas Intermediate crude oil prices is hovering around a four month low. Oil traders shouldn’t expect the market to tighten anytime soon as the U.S. is inundated with black gold.

The U.S. Oil Fund (USO) declined 1.3% Tuesday. USO has dropped 10.3% over the past three months.

WTI crude oil futures were also down 1.5% Tuesday, trading around $93.2 per barrel. [Capture the U.S. Oil Boom with the Unconventional Energy ETF]

Oil was down to its lowest level in over four months as speculators anticipate inventories to rise for the seventh week as U.S. crude output jumped to a 24-year high in October while refinery demand dipped, reports Mark Shenk for Bloomberg.

“The market is pulling back on the perception that the supply-demand balance isn’t going to tighten anytime soon,” Stephen Schork, president of the Schork Group Inc., said in the article.

U.S. crude oil production rose to 7.9 million barrels a day as of Oct. 18, the fastest clip since March 1989. [Capitalize on the U.S. Oil Boom with Yield-Generating MLP ETFs]

“The U.S. is swimming in oil right now, and there’s been no sign of a pickup in seasonal demand,” Addison Armstrong, director of market research at Tradition Energy.

In contrast, the United States Brent Oil Fund (BNO) , which tracks the Brent crude oil benchmark, has gained 0.4% over the past three months.

Brent crude futures are hovering around $105.4 per barrel.

Supply disruptions in Nigeria, Africa’s largest crude producer, and in Libya, home to Africa’s largest oil reserve, have helped support Brent prices.

Meanwhile, looking at the equities space, oil and gas explorers are outperforming. The SPDR S&P Oil & Gas Exploration & Production ETF (XOP) has gained 11.9% over the past three months and increased 32.9% year-to-date. The iShares U.S. Oil & Gas Exploration & Production ETF (IEO) added 9.9% in the last three months and is up 32.9% year-to-date.

U.S. Oil Fund

For more information on oil, visit our oil category.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.