The United States Oil Fund (USO)

The United States Oil Fund (USO) is a domestic exchange traded security designed to track the movements of light, sweet crude oil (West Texas Intermediate). It was issued on April 10, 2006 by the United States Commodity Fund, designed to provide investment results corresponding to the daily changes of the spot price of WTI crude oil to be delivered to Cushing, Oklahoma. Although this fund invests its assets primarily in futures contracts (standardized contracts), it may invest in forward contracts (customized contracts) as well.

Investing in the USO is not the only you can join in the industry. A few alternatives to this are U.S. 12-Month Oil Fund (USL) or U.S. Natural Gas Fund (UNG). The USO is known to have higher fees than its alternatives, and so it is not a favorable choice for investors.

You might wonder how good USO is doing.

The graph shows USO performance comparing to the Crude Oil by their prices. The USO actually kept up for the first few years, but failed to appear as promising as the Crude Oil starting from 2009. Crude Oil price increased incredibly in 2009, and stayed high until 2014, but we cannot see the same thing from USO. The Price Correlation Coefficient of these two is only 0.627914464, and their Return Correlation Coefficient is 0.030781845, meaning there is not enough a significant relationship between them.  This leads to the conclusion that the USO is not tracking well with Crude Oil, especially during the time when the industry is most promising.

In conclusion, I reccomend not investing in the USO. The fund never seems to have beaten its own industry market, and statistical results show that it is still going downhill. You should look into other alternatives if you consider investing in the energy industry.

Link to the data can be found here.