Summer Driving Has Oil ETFs On The Spot

June 02, 2014

Road-trip season may bode well for ETF investors allocated to oil.

The summer driving season is officially underway, and more Americans are expected to hit the roads this year than they have in nearly a decade. For ETF investors, perhaps one of the simplest ways to tap into this annual phenomenon is through oil-focused ETFs.

To be clear, the U.S. driving season lasts from Memorial Day weekend through Labor Day, and oil funds tend to do well during that period. For example, last year, a quartet of U.S. Commodities Funds’ ETFs tapping into different pockets of the oil market saw solid returns in the late May to early September period.

The United States Oil Fund (USO | A-100)—the largest oil ETF in the market today, and one that invests solely in the near-month WTI crude futures contract—led in gains in the summer of 2013 with a 14.73 percent rally.

The United States 12 Month Oil Fund (USL | B-40), which optimizes exposure to WTI crude by investing in 12 different futures contracts, wasn’t far behind, with gains of 11.2 percent. The United States Brent Oil Fund (BNO | 64)—Brent is the global oil benchmark—delivered 12.8 percent in gains last summer, while the United State Gasoline Fund (UGA) trailed with total returns of 9.45 percent.

USO_BNO_USL_UGA_2013 Summer Perf

The year before, in the summer of 2012, UGA gained nearly 19 percent between Memorial Day and Labor Day, while the other three ETFs also posted gains. These four ETFs are not the only choices investors have been looking for exposure to oil in an ETF or ETN wrapper, but they offer a good example of the honed-in exposure available in different pockets of the oil market.

This year, AAA estimated that more than 36 million people would kick off the summer driving season by driving 50 miles or more over the Memorial Day weekend. That’s the highest level since the 2008 market crash, and the second-largest number of drivers since 2000. From a historical perspective, 2014’s number of drivers is expected to clock in 2.6 percent higher than the 10-year historical average.

 

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