Oil ETPs continue to see inflows despite price falls, reports ETF Securities

May 9th, 2017 | By | Category: Commodities

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ETF Securities has reported that their crude oil exchange-traded products saw their third consecutive week of inflows even as oil prices dropped 6.3%, according to the firm’s weekly flows analysis. Crude oil ETPs received $40 million in the week beginning 1 May to add to the $213m inflows seen so far in 2017.

Oil ETPs continue to see inflows despite price falls, reports ETF Securities

Oil ETPs have notched up a third straight week of inflows despite crude price falling due to high US inventories and rising US shale production.

Nitesh Shah, director, commodity strategist at ETF Securities, commented: “As US inventories fail to decline in line with seasonal trends and US production continues to expand, oil prices have given back almost all of their gains since OPEC reached a deal to cut production in November 2016.

“Despite Saudi Arabia’s strong push to extend the deal for another six months at least, the market remains unconvinced with OPEC’s strategy. Net speculative long positions in Nymex oil futures are down by close to a third since a peak in February 2017.”

ETF Securities offers the ETFS WTI Cude Oil (LON: CRUD)  which tracks the price of WTI crude. Current assets under management (AUM) of the fund are $805m and the management expense ratio (MER) is 0.49%.

Other commodities seeing notable flows during the week included copper and aluminium, despite both metals also experiencing price declines. Copper fell by 2.6% while aluminium was down 0.5%. “Metal prices fell as the market began to price in a June Fed rate hike as a near certainty and doubts about China’s growth story resurfaced,” said Shah.

While investors in broad industrial metals baskets reduced their ETP holdings by $17m, copper and aluminium ETPs saw inflows of $23m and $9m respectively. “Copper is likely to remain in a supply deficit in 2017 and 2018 which will mark nine straight years of supply falling short of demand. Aluminium supply meanwhile should tighten significantly if China follows through with capacity constraint in winter months amid environmental concerns from smelting activity,” added Shah.

ETF Securities offer ETCs that track the price of copper and aluminium, the ETFS Copper (LON: COPA) and the ETFS Aluminium (LON: ALUM). COPA has AUM of $244m with an MER of 0.49%. ALUM has AUM of $118m and also has an MER of 0.49%.

Silver ETPs saw $13m inflows during the week, the highest since December 2016, in contrast to $11m outflows from gold ETPs. While the price of both metals fell sharply after the last Fed meeting on 3 May, the rise in the gold-silver ratio to 75 from 68 last month could represent a buying opportunity as silver appears relatively cheap compared to gold.

Shah commented, “After gold almost hit our fair value estimate of $1300 /oz a few weeks ago, we expect it to decline to $1230 by year-end. However, we estimate silver’s fair value to be close to $20/oz by year-end, offering more than a 20% upside to investors from current levels. Supply deficits, growing industrial demand and a tightening in exchange inventory provide upside potential.” Gold ETPs have seen inflows of $2 billion in the year to 8 May while silver ETPs have seen inflows of $147m over the same period.

ETF Securities offers the ETFS Physical Gold (LON: PHAU) and the ETFS Physical Silver (LON: PHAG) which track the gold and silver prices. Assets under management and MER are $5.7bn and 0.39% for PHAU, and $888m and 0.49% for PHAG.

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