ETF Securities Weekly Flows Analysis Bargain-hunters return as energy prices decline

Energy ETPs see US$97mn inflows as investors buy on price-dips…

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Platinum leads precious metals inflows as production deficit becomes more widely acknowledged.

Copper inflows rise as investors realise the metal’s catch-up potential during LME week.

Inflows into long oil ETPs rose to a 13 week high as a sharp price decline encouraged bargain-hunters to buy the commodity. Last week’s meeting between OPEC and non-OPEC members failed to provide any positive results, with numerous members looking for exemptions to a production cut and little willingness from non-members to commit to specific curbs. Crude oil slid 10% as a result. A surprising crude oil inventory build in the US also weighed on prices. Last week’s US$97.5mn of inflows into long crude oil was the highest since August 2016 and the US$13.3mn of outflows from short oil ETPs was the most since June 2016. Investors appear optimistic that OPEC will eventually be able to deliver on a deal by its November 30th meeting. Warmer temperatures in the US last week led to natural gas prices declining by close to 10%, but with odds of a La Niña weather pattern rising, cooler temperatures may emerge later this season. Investors bought US$1.0mn of long natural gas ETPs.

Precious metals gain as Clinton’s margin over Trump narrows. The whole precious metals complex rose last week as investors sought more exposure to hard assets typically viewed as a hedge against political turmoil. Investors fear that a Trump win in the US election could resemble the Brexit vote in the UK and put the market into shock. Long gold ETPs received US$10.2mn of inflows into and there was a further US$5.2mn of inflows into long precious metals baskets.

Strong auto sales support PGM tightness. Miner-labour relations in South Africa appear to be thawing with new contracts being agreed after months of delay. While this may reduce some of the concerns around mine supply, demand remains strong and the market is still is likely to end the year in the fifth consecutive supply deficit. US vehicle sales in October rose to an 11-month high and sales in Europe and China remain strong. Catalytic converters in cars are a key source of demand for platinum group metals. There have been seven consecutive weeks of inflows into platinum ETPs, with the latest inflow of US$18.0mn.

Copper sees largest inflows since July. Copper, which has underperformed the rest of the industrial metal complex this year saw US$14.1mn of inflows as the catch-up potential is being recognised. LME week put focus on industrial metals space last week. What looks like a frenzy of buying in Shanghai seems to be concerning some European investors with US$3.7 of outflows from industrial metal baskets.

What to watch this week. A raft of Chinese data from trade to loan/money growth to inflation will provide a gauge for how the world’s largest commodity consumer is faring. New Zealand’s central bank is widely expected to cut interest rates this week, under the pressure of weak commodity prices that could result in inflation expectations becoming unhinged to the downside. OPEC will release its World Oil Outlook on Tuesday. Markets will remain attentive to the degree of production cuts expected.



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