NEW YORK (TheStreet) -- Things are looking good for United States Oil Fund (USO). The security closed Thursday with a 1.4% gain to $37.83 per share, mainly due to the jump in oil prices to $103.08. Developments in the oil futures markets have also benefited investors in oil ETFs.
Progress in the price of oil has led to "backwardation" in the futures markets -- a situation in which long-term contracts are priced lower than short-term contracts. This situation has also benefited investors in oil ETFs such as USO, because when the ETF rolls its positions in near-term contracts, it purchases next-month futures contract at a lower price than the near-term contract.
This scenario leads to a gap between the price of West Texas Intermediate crude oil and the price of the USO ETF, as indicated in the chart below.
Source of data: Google finance and U.S. Energy Information Administration
The chart shows the normalized prices of oil and the USO ETF to the end of March. As the chart shows, the gap between USO and the price of oil remained wide.
This means that investors in USO during this time frame recorded a 4% gain, while investors in WTI oil lost nearly 1.5% of their investment.