Oil ETFs Surge: What's Next for Commodity Investors?

• (1:00) - What Impact Does The War Have On Crude Prices?
• (5:30) - How Do Contago And Backwardation Impact Performance?
• (8:40) - USCF Oil ETF Suite: USO, USL, BNO
• (12:30) - How Is The War Impacting Refined Products?
• (15:35) - Breaking Down The Recent Copper Supply Constraints
• (18:50) - USCF Investments Copper ETF Suite: CPER, CPXR
• (20:25) - Breaking Down Gold's Recent Performance
• (22:45) - USCF Gold Strategy Plus Income ETF: USG
• (24:40) - Should Investors Consider Commodity ETFs For Their Portfolio?
• (27:45) - Episode Roundup: UGA, GLDM, IAUM
•         Podcast@Zacks.com

In this episode of ETF Spotlight, I speak with John Love, President & CEO at USCF, about the outlook for commodity ETFs, particularly oil ETFs.

The war, now in its seventh month, has had an enormous impact on oil prices. Oil prices surged again last week after Saudi Arabia shut down its East-West crude oil pipeline following drone strikes. According to Capital Economics, oil prices could remain above $100 a barrel well into next year if the conflict in the Middle East drags on.

The United States Oil Fund USO and United States Brent Oil ETF BNO have significantly outperformed the price of crude oil they are designed to track, thanks mainly to backwardation. USO, which holds futures contracts on WTI crude oil, and BNO, which provides exposure to Brent crude oil, have surged more than 100% year-to-date.

Since the war began, the oil market has been in backwardation, with near-month contracts trading at higher prices than later-month contracts amid expectations that the disruption would be temporary. This benefits ETFs that invest in futures because each month, the fund sells its expiring near-term contracts and replaces them with cheaper, later-month contracts.

Diesel, jet fuel and gasoline prices have also risen due to disruptions to refined-product supply and transportation caused by the war. The United States Gasoline Fund UGA aims to track the daily price movements of gasoline.

Copper is benefiting from a combination of tight supply and strong structural demand, particularly from electrification, power grids and AI data centers. The war has added to supply constraints. The United States Copper Index Fund CPER holds copper futures contracts.

Gold has posted remarkable performance over the past few years, supported by geopolitical uncertainty, strong central bank purchases, and expectations around the dollar and future monetary policy. It has struggled lately, with higher rates being one of the reasons. But it still deserves a place in an investor's portfolio.

Tune in to the podcast to learn more.

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This article originally published on Zacks Investment Research (zacks.com).

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