ETF Securities writes that crude oil ETPs saw USD128 million in inflows last week, representing 7 per cent of crude assets under management, as investors saw buying opportunities in recent price weaknesses.
US crude inventories sharply declined (5.2 million barrels) last week, resulting in a 3 per cent 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, the firm says.
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, the market impact of the OPEC’s strategy remains subdued.
The very low volatility in equity markets suggests high risk appetite among investors, driving the gold price down by 0.4 per cent last week, close to ETF Securities’ year-end 2017 fair value of USD1230. While around 80 per cent 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.
The firm writes that silver prices are relatively attractive compared to gold. “We estimate silver’s fair value to be around USD20/oz by year end, presenting a potential upside of 20 per cent from the current price of USD16.4/oz. US$18.2 million outflow from all commodity ETPs and USD25.7 million 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 USD25.7 million in the past week as industrial metals dropped 2.4 per cent month-to-date.”
The firm also notes that 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 per cent vs. cons:10.8 per cent yoy, prev:10.9 per cent) and industrial production (6.5 per cent vs cons:7.0 per cent yoy, prev:7.6 per cent) prints in April may continue to weigh on industrial metals’ prices.
ETF Securities notes that despite the trade weighted USD remaining weak they have seen inflows of USD35 million of inflows in to USD long positions and outflows in short positions of USD19 million over the last three weeks highlighting a potential contrarian position building, most of the positioning has been against the EUR.
Finally, turning to Robotic and Cyber themed ETPs, ETF Securities reports that they saw USD9 million of inflows last week and year to date the sector has attracted USD300 million.