Why can Oil ETCs just track the oil price?
Tracking the oil “spot” price (meaning the prices quoted for immediate payment and delivery of particular physical commodity) implies physical ownership of the commodities and a number of associated costs such as delivery, storage and insurance. The oil “spot” price which you see on Bloomberg or quoted in the news is by definition not an investable return. As a result, investors throughout the world, and also ETCs, use liquid and standardized futures contracts to get exposure to the oil market. Standardised futures contracts imply delivery costs of pre-specified deliverable grades, at a particular location.
