Oil ETFs Outperform Crude Futures Due to Backwardated Curve
The United States Oil Fund (USO) has outperformed crude oil futures this year, largely due to the backwardation in the oil futures curve. While West Texas Intermediate (WTI) rose from $57.42 at the start of the year to around $91.30 per barrel by September 2026, USO gained 105.5%, nearly double WTI's return. This performance gap is attributed to how oil ETFs roll their futures contracts when they near expiration. The backwardation in the market—where front-month contracts trade at a premium over later months—has allowed funds like USO to buy more contracts during each roll, boosting returns. The situation began after Iran-related conflicts disrupted supply through the Strait of Hormuz and continued due to ongoing attacks on tankers and U.S. naval actions. Even as oil prices have fallen from their wartime peaks in April 2026 by over 19%, USO has still gained about 3% during that period, highlighting how backwardation can drive returns for ETFs even when the underlying commodity declines.
Topics: contango/backwardation futures curve market structure oil ETFs