United States Oil Fund (USO) Investment Losses

Exchange-traded fund suffers losses amid the COVID-19 outbreak.

Sonn Law Group is investigating possible sales practice violations by financial advisors who recommended investments in United States Oil Fund (USO). USO is an exchange-traded fund (ETF) that tracks the futures market in order to give investors exposure to the price of oil. If you or a family member has suffered losses investing, we want to discuss your case. Please contact us today for a free review of your case.

USO seeks the daily changes in percentage terms of its shares per share net asset value (“NAV”) to reflect the daily changes in percentage terms of the spot price of light, sweet crude oil delivered to Cushing, OK, as measured by the daily changes in the price specified short-term futures contract on light, sweet crude oil called the “Benchmark Oil Futures Contract,” less USO’s expenses.

USO seeks to achieve its investment objective by primarily investing in futures contracts for light, sweet crude oil, other types of crude oi, diesel-heating oil, gasoline, natural gas, and other petroleum-based fuels.

The USO was created fourteen years ago and losses are currently at 97%, dropping from a high of over $110 to the current price of $2.57. With substantial investor inflows recently, the USO stock ETF was popular among retail investors who were looking for market exposure.

However, the risks of these investments may not have been adequately represented to investors. This sector of the market is extremely volatile and in current market conditions, it was not the time for retail investors to get in or stay in. When some of the futures contracts went negative, it likely presented risks to investors that many of them never expected.

Many retail investors were allegedly under the impression that they were investing in crude oil when they were actually investing in futures contracts. Financial advisors who recommended this investment to their customers should have explained the product thoroughly, including the benefits and risks associated with them. 

The demand for oil plummeted worldwide amid the COVID-19 outbreak, front-month contracts collapsed, and the “spread” between the front-month contracts and those farther out have grown more disparate. Because of these factors, when USO rolls out of the front-month contract into the next month out in the future, it will be paying a higher spread or a more significant premium.

Investors holding USO are likely to lose money and will continue to do so if this pricing disparity continues. 

Contact Sonn Law to Discuss Recovery Options

If you suffered losses investing in United States Oil Fund, we are here to help. For a free consultation, please call us now at 866-827-3202 or complete our contact form.