Etikett: Commodity ETPs

Bargain-hunting continues among ETP investors

ETF Securities Bargain-hunting continues among ETP investorsBargain-hunting continues among ETP investors

ETF Securities Weekly Flows Analysis – Bargain-hunting continues among ETP investors

  • Oil ETPs saw massive inflows of US$130m after a sharp decline in US crude inventories.
  • Silver prices are attractive relative to gold, both have seen inflows of US$130m.
  • ETP Investors reduce their exposure to broad commodity ETPs, preferring to take tactical positions on individual commodities.

Crude oil ETPs saw US$128mn inflows representing 7% of crude assets under management, as investors see buying opportunities in recent price weakness. US crude inventories sharply declined (5.2mn barrels) last week, resulting in a 3% rebound of oil prices. Although inventory has been declining for five consecutive weeks, expanding US production led to withdrawals being low by seasonal standards up until last week. Despite the OPEC representatives’ comments about an extension of the production cuts to beyond the end of the year, the oil cartel revised upwards its estimates of the growth in non-OPEC supply from 400k to 950k barrels per day. As a result, market impact of the OPEC’s strategy remains subdued.

Strong inflows into gold and silver, totalling US$130mn despite sharp price declines. The very low volatility in equity markets suggests high risk appetite among investors, driving the gold price down by 0.4% last week, close to our year-end 2017 fair value of US$1230. While around 80% of silver’s price is explained by its correlation to gold, supply deficits, growing industrial demand and a tightening in exchange inventory provide upside potential for silver. Silver prices are relatively attractive compared to gold. We estimate silver’s fair value to be around US$20/oz by year end, presenting a potential upside of 20% from current price of US$16.4/oz.

US$18.2mn outflow from all commodity ETPs and US$25.7mn of outflows from industrial metal ETPs. We believe some investors are reducing their long exposure to broad commodity baskets in order to play more opportunistic trades such as crude oil and silver. However, industrial metals saw outflows of US$25.7mn in the past week as industrial metals dropped 2.4% month-to-date. Market participants expect a slight slowdown in Chinese economic activity in May which has also been weighing on metal prices. The slight disappointment from Chinese retail sales (10.7% vs. cons:10.8%yoy, prev:10.9%) and industrial production (6.5% vs cons:7.0%yoy, prev:7.6%) prints in April may continue to weigh on industrial metals’ prices.

Despite the trade weighted USD remaining weak we have seen inflows of US$35m of inflows in to USD long positions and outflows in short positions of US$19m over the last 3 weeks highlighting a potential contrarian position building, most of the positioning has been against the EUR.

US$9mn of inflows into robotic and cyber thematic ETPs. Robotic ETPs saw US$5.2mn of inflows last week and cyber security ETPs also saw inflows of US$2.8mn last week. Year-to-date, cyber and robotic thematic ETPs attracted US$300mn of inflows reflecting the growing appetite from long-term investors.

Video Presentation

Morgane Delledonne, Fixed Income Strategist at ETF Securities provides an analysis of last week’s performance, flow and trading activity in commodity exchange traded products and a look at the week ahead.

For more information contact

ETF Securities Research team ETF Securities (UK) Limited T +44 (0) 207 448 4336 E info@etfsecurities.com

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Oil – Room to run lower

Oil – Room to run lower

Weekly Investment Insights Oil – Room to run lower

Highlights

  • Oil prices have made decisive moves lower over the past fortnight as burgeoning US production has dampened optimism around the OPEC accord.
  • Reports of increased output from Saudi Arabia and exempt nations Nigeria  and Libya have added to concerns that the production agreement is less robust than previously assumed.
  • Should key crude benchmarks break lower through nearby support levels we could see the complex return to pre-November levels.

Burgeoning U.S. output

After months of range trading, the oil complex has made a decisive move lower as growing US output has dampened optimism surrounding the impact of last year’s OPEC/non-OPEC production agreement on global supply. Last week’s release of US crude oil inventory data instigated the latest move, as stocks grew at four times the expected rate to reach a new peak of 528.4m barrels. Bearish indicators have been mounting against the oil price for some time as news flow from the US has increasingly pointed towards resurgence in shale output as a result of the more favourable $50-$55/bbl price range. Research reports from Barclays and Citi (Source: Financial Times) both detail a 27%-36% surge in capital spending this year by North American oil and gas companies. These estimates are corroborated by the growth in the widely observed US oil rig count, which has climbed 95% from its trough from 2016 (see Figure 1). Our view is that oil prices could still see some downside from current levels, as they sit some 8% above the range from before the November accord and the agreement itself appears increasingly fragile.

Intentional or Seasonal?

While Riyadh has repeatedly stated its commitment to stabilising the oil market, the latest monthly OPEC report suggests that matter may not be so simple. Overall, according to secondary sources, OPEC’s compliance with its stated target currently sits at 91% and has indeed largely been driven by Saudi’s commitment to the agreement. However, the report also shows that Saudi’s own sources recorded an increase in production last month to near 10m barrels per day (mbpd), closer to estimates from the International Energy Agency (IEA) of 9.98mbpd. The bounce suggests that the reductions in oil volume seen in recent months could actually be a result of more seasonal adjustments to output rather than a conscious effort to stabilise the oil market. If this is the case we could see output normalise further in coming months, posing an additional threat to the accord.

Furthermore both exempt nations, Libya and Nigeria, have increased output by a combined 193k bpd since December, a 9% increase. The resurgence of US shale is likely to have put significant strain on the continued compliance to the OPEC agreement beyond the June expiry date. Should the deal fall apart, we could see oil prices sink further.

Broken support levels could spur selling

Having fallen approximately 8% on average over the past week both crude oil benchmarks face significant support. Brent and WTI crude oil prices have been dragged lower to the highs that persisted until the OPEC accord was announced, at $51/bbl and $49/bbl respectively (which also happen to coincide with their respective 200 daily moving average). Prices failed to consistently penetrate these levels for 15 months before November so a break below at this stage could trigger selling pressure. In this scenario prices have potential to fall to the 50% retracement of the recent 14 month run higher at $46/bbl and $43/bbl respectively for Brent and WTI. An abrupt end to OPEC’s current deal could be the catalyst to trigger such a move.

Investors wishing to express the investment views outlined above may consider using the following ETF Securities ETPs:

Commodity ETPs

ETFS Brent Crude (BRNT)
ETFS WTI Crude Oil (CRUD)
ETFS Longer Dated Brent Crude (FBRT)
ETFS Longer Dated WTI Crude Oil (FCRU)

2x & -1x

ETFS 2x Daily Long Brent Crude (LBRT)
ETFS 2x Daily Long WTI Crude Oil (LOIL)
ETFS 1x Daily Short Brent Crude (SBRT)
ETFS 1x Daily Short WTI Crude Oil (SOIL)

3x

ETFS 3x Daily Long WTI Crude Oil (3CRL)
ETFS 3x Daily Short WTI Crude Oil (3CRS)

Currency Hedged ETPs

ETFS EUR Daily Hedged Brent Crude (EBRT)
ETFS EUR Daily Hedged WTI Crude Oil (ECRD)
ETFS GBP Daily Hedged Brent Crude (PBRT)
ETFS GBP Daily Hedged WTI Crude Oil (PCRD)

Important Information

This communication has been provided by ETF Securities (UK) Limited (”ETFS UK”) which is authorised and regulated by the United Kingdom Financial Conduct Authority (the ”FCA”).

This communication is only targeted at qualified or professional investors.

The information contained in this communication is for your general information only and is neither an offer for sale nor a solicitation of an offer to buy securities. This communication should not be used as the basis for any investment decision. Historical performance is not an indication of future performance and any investments may go down in value.

This document is not, and under no circumstances is to be construed as, an advertisement or any other step in furtherance of a public offering of shares or securities in the United States or any province or territory thereof. Neither this document nor any copy hereof should be taken, transmitted or distributed (directly or indirectly) into the United States.

This communication may contain independent market commentary prepared by ETFS UK based on publicly available information. Although ETFS UK endeavours to ensure the accuracy of the content in this communication, ETFS UK does not warrant or guarantee its accuracy or correctness. Any third party data providers used to source the information in this communication make no warranties or representation of any kind relating to such data. Where ETFS UK has expressed its own opinions related to product or market activity, these views may change. Neither ETFS UK, nor any affiliate, nor any of their respective officers, directors, partners, or employees accepts any liability whatsoever for any direct or consequential loss arising from any use of this publication or its contents.

ETFS UK is required by the FCA to clarify that it is not acting for you in any way in relation to the investment or investment activity to which this communication relates. In particular, ETFS UK will not provide any investment services to you and or advise you on the merits of, or make any recommendation to you in relation to, the terms of any transaction.  No representative of ETFS UK is authorised to behave in any way which would lead you to believe otherwise. ETFS UK is not, therefore, responsible for providing you with the protections afforded to its clients and you should seek

Gold ETP Assets Soar By Over 20 per cent

Gold ETP Assets Soar By Over 20 per cent

Gold ETP Assets Soar By Over 20 per cent Deutsche Bank – Synthetic Equity & Index Strategy – Europé

European Monthly ETF Market Review – Gold ETP Assets Soar By Over 20 per cent

10 March 2016 (73 pages/ 1970 kb)

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European ETP Highlights

Global ETPs assets stood at $2.7 trillion at the end of February’16, 4.6% down from last year end levels ($2.9 trillion). European ETP assets reached $487bn (€448bn) at the end of Feb’16. European ETPs had another good month in 2016 with net inflows of +€2.1bn (+€2.2bn in the prev. month). Interestingly, Commodity ETPs dominated with inflows of +€2.5bn followed by +€1.6bn inflows in Fixed Income ETFs. Equity ETFs witness redemptions of -€1.9bn during February. Global ETPs flows totaled +$9bn for February led by Asia-Pacific listed ETPs recording +$5.6bn in monthly inflows while US listed ETPs returned to positive territory with inflows of +$1bn.

Record flow of €2.2bn into European Gold ETPs

European Commodity ETPs market saw inflows for the second consecutive month with particularly strong inflows of +€2.5bn in February (+€0.7bn in Jan’16). This was almost entirely dominated by Gold ETPs. Flight to safety resulted in Gold ETPs receiving record inflows of +€2.2bn in Feb’16 (YTD +€2.7bn). A similar trend was also observed in US, where US Gold ETPs witnessed inflows of +$5.1bn.

More inflows into the Smart Beta segment

Europe listed smart beta ETFs registered inflows of +€0.8bn during February and assets reached at €9.6bn which is 8% higher than last year-end total assets (€8.9bn) while total European ETPs assets decreased by -4% YTD (€448bn in Feb’16 and €467bn in Dec’15). Within smart beta, we have seen investor’s preference for minimum volatility products over other products during volatile markets.

Net inflow into UK equity ETPs despite Brexit fears

ETFs tracking broad and blue chip European equities experienced outflows of -€1.3bn. Investors favored UK focused ETFs (+€0.4bn flows in Feb’16) despite fears of UK exit from the European Union intensified in Feb’16. US and Germany focused ETFs witnessed selling pressure in February and recorded outflows of -€0.8bn and -€0.6bn respectively.

Fixed Income ETFs registered inflows dominated by Investment Grade Bonds

European Fixed Income ETFs registered inflows of +€1.6bn during Feb’16 (+€1.5bn YTD flows). A clear preference was shown for Investment Grade Bonds which recorded inflows of +€1.6bn (+€1.5bn YTD) while High Yields Bonds was almost flat on a net basis (-€28mn in Feb and -€305mn in Jan).