United States Heating Oil Fund Tracks No.2 Fuel Oil Futures Prices
While traders watch the latest crude oil market movements, the United States Heating Oil Fund (UHN) focuses on and tracks the price movement of heating oil or No.2 fuel, an energy commodity in high demand in certain sectors of the US economy.
Managed by United States Commodity Funds, LLC (formerly Victoria Bay Asset Management, LLC), the UHN is a heating oil ETF (exchange traded fund), launched in 2008, offering investors exposure to the price of heating oil or No.2 fuel.
United States Commodity Funds, LLC is registered with the Commodities Futures Trading Commission as a commodity pool operator and had $1.9 billion assets under management in June 2008.
You can now subscribe to the free Commodity Universe Ezine below, and get the latest articles on the commodity sector . Just your first name and email. It's as easy as 1-2-3! The United States Heating Oil Fund (Amex: UHN) is distributed by ALPS Distributors, Inc., and had 200,000 shares outstanding on 9 April 2008.
So how does this fund does work and how might you consider using it as a means of gaining exposure to heating oil price movements? What does the fund consist of?
UHN is a US commodity based exchange traded security set up as a Delaware limited partnership which creates units that can be bought and sold on the American Stock Exchange.
It tracks the price movements of the near month Nymex heating oil futures contract, a very actively traded contract and the main US heating oil benchmark.
This contract reflects the price of No.2 fuel for physical delivery to New York Harbor.
As a distillate product of crude oil, heating oil is a low viscosity, flammable liquid used in building furnaces and boilers.
It is often used in locations which do not have a supply of natural gas.
As part of the energy complex it is a very important commodity in the global economy. It will remain so until such time as there is a major global shift in fuel used to heat buildings.
Normally the benchmark is the price of the near month futures contract.
But within two weeks of expiry of the near month contract, the heating oil benchmark will then be the futures contract for the next month. The average percentage daily change in the Net Asset Value (NAV) of the UHN is designed to closely track (+/- 10%) the average daily percentage change over a 30 day period in the price of a specified heating oil futures contract on Nymex, less the fund’s expenses (management expense ratio, 0.6%).
The fund will also hold US government bonds of two years or less maturity as well as cash funds to meet collateral requirements. What are the benefits of investing in the UHN exchange traded fund?
What should you look at, as a potential trader, tracker investor or hedger, in the United States Heating Oil Fund, LP?
Essential requirements:
So if your professional adviser thinks using a heating oil ETF is a good way to gain exposure to the energy markets and you have understood the prospectus and tax issues, then the United States Heating Oil Fund may be a way of tracking heating oil prices on Nymex. The broad view is that heating oil prices will broadly track the movement in crude oil and other petroleum products, particularly with demand likely to remain strong in the medium term.
Global energy demand will continue to grow strongly for the foreseeable future and as oil reserves dwindle, a search for alternative fuels to heating oil and other petroleum distillates will intensify.
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