UPDATE 1-VelocityShares launching oil ETNs to replace delisted notes

(Adds futures market data, VelocityShares statement, details on the notes)

NEW YORK, Dec 8 (Reuters) - VelocityShares said on Thursday it was launching two new exchange-traded notes as an “alternative” to a pair of popular products used to bet on oil prices that are being delisted this week.

The new notes - VelocityShares 3x Long Crude Oil ETN (UWT) and VelocityShares 3x Inverse Crude Oil ETN (DWT) - were being issued by Citigroup.

In a statement, Janus Capital Group Inc unit VelocityShares said the notes would “continue to service” investors who want to use trading tools to get exposure to oil.

The unexpected issuance of new notes comes as Credit Suisse’s $617 million VelocityShares 3x Long Crude Oil ETN (UWTI) is poised to become the largest-ever note to be delisted from U.S. exchanges after trading Thursday. A smaller related ETN, the $210 million VelocityShares 3x Inverse Crude Oil ETN, is also delisting.

The notes promise to magnify or deliver the opposite of oil price gains, allowing investors to book huge profits when oil prices rise or fall. UWTI prices soared last week, for instance, when the Organization of the Petroleum Exporting Countries (OPEC) agreed to curb crude production.

Credit Suisse said in a Nov. 16 statement it would delist the ETN to better align “its product suite with its broader strategic growth plans.”

But the notes are delisting without a new redemption option for investors who retain them, raising the prospect that investors who failed to find buyers for their notes could be stuck in the products, which do not officially expire until 2032.

Investors hold $22 billion of U.S. ETNs which, like debt, constitute a pledge by an issuer. Payouts are based on the performance of the underlying asset, but the notes do not “hold” those assets, unlike ETFs to which they are often compared.

Note-issuing banks will still often take positions in the oil market to hedge their exposure. And oil futures markets were unusually active on Thursday as investors fled the notes ahead of their delisting.

The prompt spread for U.S. crude futures, or the spread between the January to February contract CLc1-CLc2, rallied as traders liquidated the UWTI and DWTI contracts, tightening from $1.17 a barrel to as much as 98 cents.

Reporting by Trevor Hunnicutt; Additional reporting by Catherine Ngai; Editing by Andrew Hay