April 27, 2020 / 1:16 PM / a month ago

U.S. Oil Fund to exit June futures, buys contracts expiring late 2020, 2021

April 27 (Reuters) - The United States Oil Fund LP will exit its position in the front-month June crude oil futures contract and may need to hold more cash to satisfy potential margin requirements, the largest oil-focused U.S. exchange-traded product (ETP) said on Monday.

After avoiding potentially catastrophic losses when May oil futures traded below $0 per barrel for the first time ever last Monday, USO has been scrambling to diversify its holdings into later-dated contracts, from the most heavily traded front-month contract.

The ETP, which lost 39% of its value last week, was down 11.7% in premarket trading at $2.28 on Monday.

USO said earlier in the day it will exit the current front-month June contract completely and put 10% of its portfolio into June 2021’s contract, while also taking new 15% positions in the October and December contracts.

The changes will be carried out over a three-day period starting Monday.

From May 1, USO's positions will be rolled over 10-days before the contracts expire, instead of four previously, the fund said in a filing www.sec.gov/ix?doc=/Archives/edgar/data/1327068/000117120020000302/i20277_uso-8k.htm.

Before a futures contract expires, USO rolls over its holdings into the following month’s contract if it can not take physical delivery of the oil.

When the May oil futures crashed last week, USO had already rolled its holdings into later-dated contracts.

After the current roll over, USO’s portfolio will be invested about 30% in the July contract and about 15% each in the August, September, October and December contracts. Almost 10% of the portfolio will be invested in June 2021 contract. (Reporting by Shariq Khan in Bengaluru; Editing by Shinjini Ganguli)

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