The United States Oil Fund (NYSEARCA: USO) tracks the daily price movement of West Texas Intermediate crude oil futures. For traders who want oil exposure without a futures account, USO provides a simplified proxy.
How USO Works
USO holds near-month WTI futures contracts and rolls them before expiry. The fund does not buy physical oil. This creates tracking difference: over time, contango (futures costing more than spot) erodes value. In 2020, USO dropped to negative 10 percent of spot oil price due to extreme contango. The roll happens roughly every two weeks, and in contango each roll buys the more expensive back month.
The 2020 Restructuring
April 2020 forced a redesign. WTI settled below zero for the first time in history, USO had concentrated itself in a single front contract, and regulators took notice. Within weeks the fund shifted to a basket spread across twelve months of contracts and briefly suspended creations during the chaos. The new structure tracks the front month less tightly, but it cannot be squeezed by a single expiry again.
When USO Works
Short-term trading. USO tracks daily oil price movements reasonably well over days to weeks. If you expect a geopolitical spike in crude, USO captures the move without requiring futures margin.
When USO Fails
Long-term holding. The roll cost creates persistent decay. Over any 12-month period, USO typically underperforms spot oil by 5-15 percent depending on the futures curve shape.
Reading the Futures Curve
The curve tells you which instrument to use. Backwardation, where near contracts price above later ones, means rolling earns rather than pays, and oil ETFs track spot closely. Contango does the opposite, and the steeper it gets, the worse the drag. A useful rule of thumb: one dollar per month of contango costs roughly 12 percent a year in roll drag. Check the curve before choosing the vehicle, not after.
Seasonality and Positioning
Crude has calendar habits worth knowing. US driving season builds gasoline demand from Memorial Day through Labor Day, and refineries ramp crude intake beforehand, which historically lifts WTI in the second quarter. Winter leans on heating oil instead, and first-quarter crude often chops sideways. Positioning matters as much: when hedge fund net longs in WTI reach multi-year extremes, rallies run out of new buyers and the reversal arrives without a headline. The CFTC commitments of traders report publishes every Friday and takes five minutes to check.
The Wider Oil Complex
USO is not the only wrapper. USL spreads exposure across a year of contracts and decays slower. BNO holds Brent, which prices European supply shocks differently from WTI. UGA tracks gasoline, useful when refinery outages drive the crack spread. Leveraged products such as UCO compound the decay problem and are built for single-day holds only, a warning printed in their own documentation.
Trading Oil on Mongkolchain
On Mongkolchain, oil CFDs track spot and futures prices without ETF roll costs. Trade XTI/USD (WTI) or XBR/USD (Brent) with leverage and bracket orders. No ETF structure means no contango drag.
Key levels for WTI: support at 68 dollars, resistance at 78 then 82. OPEC+ meeting announcements and US inventory reports (Wednesday 10:30 AM ET) are the primary catalysts. Spread on XTI/USD runs wider than major forex pairs, so treat oil as a swing instrument with one to three day holds, and go into inventory prints at reduced size or flat.
For oil trading, use the instrument designed for the timeframe. USO for short-term bursts. Mongkolchain oil CFDs for everything else, with a written plan in place for OPEC meeting days either way. And never average into ETF decay just because the fund looks cheaper than spot crude.