United States Oil Fund LP (NYSE:USO) is trading higher Thursday morning as investors react to a major escalation in global oil supply risk, a development that directly affects the fund because USO is designed to track movements in West Texas Intermediate crude oil futures. Here’s what investors need to know.
- United States Oil Fund stock is showing exceptional strength. Why are USO shares rallying?
USO Tracks Near-Term Movements In Crude Oil Futures
Unlike an operating company, USO is an exchange-traded fund that gives investors exposure to near-term oil prices, so when crude rallies sharply, the fund often moves higher as well.
The latest catalyst was a sharp deterioration in Middle East energy conditions. Fresh reports said the U.S.-Iran conflict has intensified, while U.S. officials are preparing to release 172 million barrels from the Strategic Petroleum Reserve in an effort to contain energy costs during the war.
Goldman Warns Of Largest Oil Supply Shock Ever
The more significant driver for USO, however, is the oil market shock itself. Goldman Sachs said the disruption near the Strait of Hormuz now represents the largest oil supply shock on record, with Persian Gulf exports falling to roughly 3% of normal levels.
The bank raised its Brent crude forecast to an average of $98 in March and April and warned that oil prices could climb above the 2008 peak if flows remain severely disrupted through the end of March.
That matters significantly for USO because the fund’s value is closely linked to front-month crude futures, which were already up about 6% Thursday morning near $95 a barrel.
USO RSI Moves Into Overbought Territory On Rally
The United States Oil Fund RSI has mostly fluctuated within the neutral range (30–70) over the past year, with occasional brief spikes into overbought territory above 70.
Recently, the RSI has climbed well above the overbought threshold, signaling strong bullish momentum but also suggesting the potential for short-term consolidation if buying pressure eases.
USO Soars Thursday Morning
USO Price Action: United States Oil Fund shares were up 8.35% at $117.07 at the time of publication on Thursday, according to Benzinga Pro data.
Image: Shutterstock
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