ETF Securities reports profit taking on the back of oil price rises

ETF Securities writes that long oil ETPs saw USD39.5 million in outflows as investors took profits on the 3.2 per cent rise in the oil price.

Nitesh Shah, director, commodities, writes that oil price prices have risen to a three and a half year high on the back of the US announcing the reintroduction of sanctions against Iran.

“Global oil markets have already become tight as a result of outages from Venezuela and strong compliance from OPEC, with their accord to curb production. Given that the US does not import any Iranian oil and no importing country appears to agree with the US stance, we expect only minimal compliance with the US’s extraterritorial rule. In short the sanctions are unlikely to kill Iranian oil but the geopolitical premium is likely to linger.

“Some of the more recent gains are likely to be deflated as other countries increase production. Investors appear to be taking profit as the gains look unsustainable.”

ETF Securities writes that gold continued to attract inflows last week on the back of heightened political risk.

The political calendar, with the meeting between Donald Trump and Kim Jong Un and the US’s intervention in Iran are all having their effect. Long gold ETPs received USD16.7 million in inflows, while closely correlated silver ETPs received USD3.1 million.

The firm notes that short FTSE MIB equities attracted its largest inflows since June 2017 as investors fear the coalition of anti-establishment parties in Italy. Short FTSE MIB ETPs gained USD3.6 million while long FTSE MIB saw USD4.5 million of outflows.

Long aluminium ETPs received USD1.9 million, their largest weekly inflows since February 2018, while short aluminium ETPs received USD1.1 million, their largest weekly inflows since May 2016.

Finally, investors became more bullish on the euro against the US dollar, Shah writes. “Last week investors bought USD9.7 million of long EUR short USD ETPs and sold USD8.3 million of long USD short EUR ETPs.

“Investors appear unconvinced that US dollars’ recent moderate appreciation can be sustained. Although with economic data continuing to weaken in European and little indication that the Federal Reserve will be deterred from raising rates another couple of times this year, we think that there is potential for rate differentials to drive the US dollar higher.”

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