ETF Securities weekly analysis finds that crude oil ETPs have experienced their largest outflows in six months after OPEC agreed output cut extension. The firm writes that OPEC and its non-OPEC partners have agreed to freeze production at current levels for another nine months.
“The Saudi-Arabian led cartel has sought to bolster prices after the price collapse that emerged when its 2014 experiment failed and crippled many OPEC member economies. A deeper cut would be needed to shock the market to drive prices higher. With US, Canadian and Brazilian production continuing to grow and global demand remaining soft, global oil inventories will remain elevated. OPEC’s target of bringing down the level of OECD oil inventories to its five-year average will continuingly be undermined by the growth in US shale oil. As a result, crude prices slid and investors took the opportunity to book profits, with long oil ETPs experiencing the largest withdrawal since early December 2016, totalling USD100 million.”
Technology ETPs saw their eleventh week of inflows as the tech sector continues to lead equity global performance, as tech earnings in the US have come in better than expected, the firm writes. “The inflows into both cybersecurity and robotics themed ETPs totalled USD34 million, the largest inflows in 11 weeks.”
US Dollar buying has continued at the expense of the Euro, with the sixth consecutive week of inflows. ETF Securities writes that although the market is fully pricing in a rate hike in the US at the Federal Reserve’s June meeting, the US Dollar continues to weaken.
“Last week, the US Dollar index (DXY) reached the lowest level since October 2016. Futures positioning has moderated in recent weeks, in line with the price weakness. In contrast, ETP investors have been optimistic, driving inflows into long USD ETPs for the sixth consecutive week. Inflows over that period have totalled USD57 million. At the same time, investors have been cutting positions from short USD ETPs, with withdrawals totalling USD15.3 million. Last week’s outflows were the largest from short USD ETPs since the first week in January 2017. The primary buying of USD came against the Euro which broke above key resistance at 1.12 level. Long Euro ETPS experienced the largest withdrawals in 20 weeks, while short Euro ETPs tallied the sixth consecutive week of inflows.”
Turning to industrial metals, ETF Securities writes that investors have taken the stabilisation in metals prices as a signal to start bargain hunting in the sector. “The speculative unwind has begun to ease and with signs of stabilisation in the Chinese economy and China’s authorities initiating new infrastructure programs. Broad industrial metals basket received USD42 million, the largest in seven years.”