Why is USO falling as the oil price rises?

The price of oil has risen by at least per barrel over the past days, yet the USO ETF has fallen 2-3% in this time. What’s going on? I thought USO was supposed to track the price of oil.

One Response to “Why is USO falling as the oil price rises?”

  1. Michael T Says:

    I’m not sure why you think that oil has risen in the past few days since oil fell below $34 per barrel (new recent low) yesterday. Only today did it recover and half of that was due to a change in futures attached to NYMEX oil.

    USO tracks oil futures but it doesn’t indicate which futures it is tracking. Today the NYMEX oil was tracking the February futures which were to expire today and those futures shot up about $2.50 prior to close. Then NYMEX oil switched to the March futures which already was another $2.00 above the February futures close (but down $1.75 for the day). Many other futures have been down for most of last and this week.

    So unless we know which futures USO is invested in at any point in time, it will be difficult to determine whether it should rise or not.