PowerShares DB Oil Fund(DBO): Rubish at tracking Crude oil price!

freddel · Feb 25, 2011

Hi there,

I have bought last week, on the 15th of February when the crude oil spot price was $85.3, some PowerShares DB Oil Fund at $28.
I'm very supprised by the gap between the return from this ETF and the actual crude oil spot price:
Today:
Crude oil trade at $97.36 which imply that I should have a return of 14.13%
while PowerShares DB Oil Fund is trading at $30 which make an absolute of return of 6.2%.

How such a big gap is possible?

Thanks in advance for your answer.

Cheers,
Freddy

bone · Feb 25, 2011

Because many ETF's apparently are very poor proxies for the pure commodity play. Factor in the basket construction slippage and the management fees - and you get what you pay for.

http://www.reuters.com/article/2011...feedType=RSS&feedName=financialsSector&rpc=43

clacy · Feb 25, 2011

I would recommend OIH over DBO.....

http://stockcharts.com/freecharts/perf.html?$OIX, dbo, oih

Butterball · Feb 25, 2011

You can never replicate the spot returns of a commodity. Unless you buy physical and store it at your house. And even that costs money (opportunity costs, transaction costs, storage, insurance etc.)

And in the futures world you always pay transaction costs, slippage and must account for the term structure.

Adjusted for contango and ETF costs, the crude oil fund USO had a net gain of 0% over the last 18 months while spot crude went from $70 to $100 over the same period.

Joe Doaks · Feb 26, 2011

USO tracks gud.

freddel · Feb 26, 2011

Quick comparison between DBO, OIH and USO since the 15/02/2011:

http://uk.finance.yahoo.com/echarts...osshair=on;ohlcvalues=0;logscale=off;source=;

phil1424 · Feb 26, 2011

ETF's fucking suck if your trying for the same returns of the commodities there supposedly follow , even a fuckin idiot like me learned that the hard way . But so do the losses .

One piece of advise NEVER EVER buy UNG (natural gas ETF)

intradaybill · Feb 26, 2011

Quote from Joe Doaks:

USO tracks gud.

USO up 12.12% in last 5 days.

JeffUSA · Mar 11, 2011

I haven't had time to run the numbers yet but I'm starting to think that XOM tracks the price of Oil better than any friggin Oil ETF.

freddel · Mar 12, 2011

not really... oil companies will not perform well in the mid-run according to the fact that high oil price could trigger a double deep recession in western economies which will in turn lower the exports of emerging economies and thus decrease the global demand for oil.
The best short/mid term play are futures

Look at the chart of XOM against ETF's
http://uk.finance.yahoo.com/echarts? s=DBO#symbol=dbo;range=20110215,20110311;compare=xom+oih+uso;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=;