Rush to Biggest Oil Fund Echoes Last Collapse: Chart of the Day

Investors are rushing into the top exchange-traded fund that follows oil at the fastest rate since 2009, when its assets rose to a record in the aftermath of the previous price crash.

The CHART OF THE DAY shows the assets of the U.S. Oil Fund, which tracks West Texas Intermediate futures traded in New York, increased this month to the highest level in five years. At $2.42 billion, the fund has grown fivefold since May. WTI, shown in the lower panel, has lost half its value since June.

“We see continued ‘catch the falling knife’ trading,” said Dave Nadig, chief investment officer of San Francisco-based ETF.com. “A lot of traders are trying to call the bottom, and I imagine we’ll continue to see ‘it can’t go lower’ allocations into oil ETFs for some time.”

WTI, the U.S. crude benchmark, slid 0.3 percent to $49.28 a barrel Tuesday on the New York Mercantile Exchange, falling for a fifth straight day. The U.S. Oil Fund dropped 0.4 percent to $18.04 on the New York Stock Exchange. The fund’s assets reached $2.59 billion on Feb. 13. The ETF grew to $3.92 billion at the end of February 2009, when oil tumbled to about $40 from more than $140 in July 2008.

The fund’s assets may also have been growing as some investors borrowed shares to short them on expectations of lower prices, said Nadig. The number of U.S. Oil Fund shares on loan to short sellers was 37.2 million as of Jan. 30, or about 113 percent of average daily volume, according to exchange data. That’s up from 31.3 million on Jan. 15. Short interest was as much as eight times daily volume in June.

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