Investors flee biggest U.S. crude oil fund as volatility surges

Investors bailed out of the United States Oil Fund last week as volatility surged.

A net 19.3 million shares of the biggest exchange-traded fund that tracks oil were sold back, a weekly record since the ETF’s inception in 2006, according to data compiled by Bloomberg. Total shares outstanding dropped to 176 million on Sept. 4, the lowest since Aug. 11.

Investors withdrew from the fund as oil’s trading volatility reached the highest since March last week. The weekly redemption represents an outflow of $290.9 million, the most since December 2013.

“There’s a lot of volatility in the market,” said Carl Larry, head of oil and gas for Frost & Sullivan LP in Houston. “We are seeing money being pushed away from oil.”

High Volatility  

The CBOE Crude Oil Volatility Index, which measures the volatility of the ETF, increased to 57.51 on Sept. 1, the highest since March 17.

The U.S. Oil Fund, which holds West Texas Intermediate futures, slipped 0.4 percent Tuesday to $15.02. WTI crude lost 0.2 percent to $45.94 a barrel on the New York Mercantile Exchange.

The ETF is down 26 percent this year, compared with a 14 percent decline for front-month futures. The fund’s performance is trailing oil because the market is in contango, meaning futures for delivery in later months trade higher than nearby contracts. The structure erodes gains as the ETF sells the expiring contract and buys the more expensive next-month futures.