Monday, June 15, 2009

Stock In Focus: United State Oil Fund (USO)

This Oil Fund has risen 77% since reaching a low of 22 in February of this year.

Looking at the chart of USO above, it is above its 20 and 40 day moving averages which is bullish for USO. It is also above its 100 day moving average and is close to but not yet above its 200 moving day average. If it does move above its 200 moving day average, USO could continue to move higher since this is an important level for traders and many traders would buy stocks once a stock moves above its 200 moving day average.

ADX is close to 30 which is indicating that a potential strong uptrend is developing for USO.

MACD is at 2 and above its signal which is bullish for USO. MACD is also seen to be trending upwards which is bullish for USO.

Slow Stochastic is at 86 which is at overbought levels so it is possible for a correction to occur sometime this week. However since USO is above its moving day averages and is in an uptrend, even at such high stochastic levels, it could still move higher. However, the US dollar has been badly battered in recent weeks and it is possible that if the US dollar rises, this would have an adverse effect on commodities including oil. So it is possible that USO could experience a correction this week.

USO Fund Profile

The fund seeks to reflect the performance, minus expenses, of the spot price of West Texas Intermediate (WTI) light, sweet crude oil. The fund invests in futures contracts for WTI light, sweet crude oil, other types of crude oil, heating oil, gasoline, natural gas and other petroleum based-fuels that are traded on exchanges. It may also invest in other oil items such as cash-settled options on oil futures contracts, forward contracts for oil, and OTC transactions that are based on the price of oil. The fund is nondiversified.

Total Expense Ratio 0.45%
Total Net Assets 2.80Billion USD
Fund Inception Date: 10-Apr-06
Legal Type: Exchange Traded Fund


F/C Ws Crude (Fut) 3.49% of Assets
F/C Wti Crude (Fut) 20.43% of Assets
Wti Crude (Fut) 26.08% of Assets

The following is Energy Information Administration (EIA) forecast for U.S. Crude Oil (please note that forecasts for energy prices are difficult to determine due to price volatility):

Consumption: Due to the weak economy, total consumption of liquid fuels and other petroleum products is projected to contract by 550,000 bbl/d or barrels per day (2.9 percent) in 2009, including a decline of 220,000 bbl/d (5.5 percent) in distillate fuel consumption and about 100,000 bbl/d (6.9 percent) in jet fuel consumption.

Motor gasoline, however, is projected to increase by 30,000 bbl/d (0.3 percent) as a result of the substantial declines in retail prices from last summer and the stabilization of real disposable income. The gradual economic recovery in 2010 is expected to contribute to a 300,000-bbl/d (1.6 percent) increase in total liquid fuels consumption.

Production: Total domestic crude oil production averaged 4.96 million bbl/d in 2008, down from 5.06 million bbl/d in 2007 (U.S. Crude Oil Production Chart). Production is expected to increase to an average of 5.27 million bbl/d in 2009 and 5.32 million bbl/d in 2010, including an estimated expectation, with a wide range of uncertainty, of hurricane‐induced outage of about 4.5 million barrels for the offshore region in 2009.

Prices: WTI crude oil prices, which averaged $99.57 per barrel in 2008 (Crude Oil Prices Chart), are projected to average $58.70 per barrel in 2009 and $67.42 per barrel in 2010. However, energy price forecasts are highly uncertain.

One measure of how the market reflects this uncertainty is the sizable participation in near-term options on crude oil futures contracts at strike prices that are significantly different from current futures market prices. This reflects the tendency for crude oil prices to fluctuate within a wide range in a short period of time.

EIA projects that regular-grade motor gasoline retail prices, which averaged $3.26 per gallon in 2008, will average $2.33 per gallon this year, up 21 cents per gallon from last month’s Outlook projection. These prices are projected to rise to $2.56 per gallon in 2010, 26 cents above that projected in the previous Outlook.

Diesel fuel retail prices, which averaged $3.80 per gallon in 2008, are projected to average $2.40 per gallon in 2009, up 14 cents from the previous Outlook. Diesel fuel retail prices are projected to average $2.67 per gallon in 2010, up 19 cents per gallon from the previous Outlook.


Yahoo Finance
Energy Information Administration

Remember to sign up for future updates by filling in your email address and also please subscribe to the RSS feed.

To appreciate beauty; to find the best in others; to leave the world a bit better whether by a healthy child, a garden patch or a redeemed social condition; to know even one life has breathed easier because you have lived. This is to have succeeded.

Ralph Waldo Emerson