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Thursday, June 11, 2009

OIL ETF Disappoints Oil Investors

The exchange traded fund (ETF) for oil, "iPath S&P GSCI Crude Oil Total Return Index (OIL ETF Charts), " is a huge disappointment for Oil Investors who wanted a fund that mirrored the price of oil without having to buy oil futures.
Since the start of 2009, the price of oil has surged 60% while the OIL ETF is essentially flat at only up about 4%!

click chart courtesy of for full size image

On the chart,
  • WTIC is "West Texas Intermediate Crude - Continuous Contract"
  • OIL is "iPath S&P GSCI Crude Oil Total Return Index"
Over the life of the fund, OIL has underperformed the price of oil considerably.

click chart courtesy of for full size image

According to, the "iPath S&P GSCI Crude Oil Total Return Index ETN (OIL)"
The Fund is a sub index of the Goldman Sachs Commodity Index. The Index reflects the returns that are potentially available through an unleveraged investment in the West Texas Intermediate crude oil futures contract.
Not only does OIL under perform the price of oil, but investors had to pay an expense ratio of 0.75% a year do do so.

Unless you are an investment professional, I do not recommend investing in oil via the futures market. The leverage in futures can quickly wipe you out. With the recent data comparing the OIL ETF with the price of oil, I won't be recommending that as an investment in the price of oil either.

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