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Over the past week, the United States Oil Fund (USO) has made a number of structural changes in order to keep its doors open. On Monday, it did it again.

Prior to the oil market breakdown, USO held only near-dated oil futures contracts. That meant, under its previous strategy, it would have been 100% in the June 2020 contracts.

Then, it changed its mandate to allow it to spread its exposure to oil futures contracts dated several months into the future. As of yesterday's market close, USO was still in the June 2020 contract, but had additional holdings dated all the way out to the September 2020 expiration.

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On Monday, USO changed course again announcing that it would be exiting the June 2020 contracts altogether and easing their mandate to allow for oil contract purchases with expirations all the way out to a full year into the future.

USO is expected to complete these changes by later in the week, but you can see that the wheels are already in motion.

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The likely reason for this is that the CMO and USO's issuer, USCF, realize that there's the potential for another crash around the June contract expiration date similar to the one we saw in May. Oil contracts further out into the future fell during the May contract expiration, but not nearly to the degree that the May one did. The company is likely looking to eliminate its exposure to this risk altogether before the June contracts have the chance to go to zero too.

This is also likely why we're seeing such volatility and downward pricing pressure in the June contract. USO was a huge holder of that contract and the need to dump it all is creating a short-term supply/demand imbalance. I suspect once those contracts are off USO's books, we see some normalization once again.

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