After pouring more than $6 billion into oil ETFs, investors are looking for a quick exit for two reasons: 1) the oil rebound might take much longer than originally expected and 2) the contango market is becoming an even bigger factor. This MarketsMuse blog update is courtesy of Reuters’ article “Look out OPEC! Oil ETF investors head for exit, risking new slump” with an excerpt below.
Oil investors who amassed a $6 billion long position in exchange traded funds, occupying as much as a third of the U.S. futures market, are now racing for the exit at a near record pace.
Outflows from four of the largest oil-specific exchange traded funds, including the largest U.S. Oil Fund (USO), reached $338 million in two weeks to April 8, according to data from ThomsonReuters Lipper. That is the first two-week outflow since September and the biggest since early 2014, marking a turnaround from heavy inflows in December and January on bets that oil prices would quickly rebound from six-year lows.
If the exodus gathers pace it could signal new pressure on crude oil prices that had begun to stabilize at around $50 a barrel this year following their 60 percent plunge, says John Kilduff, a partner at energy fund Again Capital LLC in New York.
Retail investors may have been “trying to bottom fish and got washed out with the recent new low,” he said.
To continue reading about the possibility of a new oil slump from Reuters, click here