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Oil ETCs See Surge of Inflows on the Back of Oil Price Declines

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Oil ETCs See Surge of Inflows on the Back of Oil Price Declines  Although the Greek government survived the no confidence vote last week, a number of hurdles still lie ahead before the country is in a position to receive the funds necessary to cover … 


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            looming July and August debt payments. Investors remain concerned, again looking to gold as a buffer against potential sharp risk asset declines. Meanwhile, the IEA coordinated release of emergency oil reserves last week and persistently weaker-than expected growth indicators, have pushed oil prices down sharply. ETP investors appear to view the price declines as an opportunity to build long energy positions, accumulating over $100mn of ETFS energy ETCs last week.

            Physically-backed gold ETCs see net inflows of $193mn in June as Eurozone sovereign problems remain unresolved. Last week alone saw $51mn of inflows into ETFS gold ETPs. The Greek government has a slender majority, surviving  a no confidence vote by just 3 votes. This week they must vote in painful new austerity measures in order to gain access to international funds to cover July and August debt payments. Physically-backed gold ETCs experienced their fourth consecutive weekly net inflows last week as investor concerns remain about whether Greece will have the political will to push the measures through.

            Energy ETC inflows over $100mn, the largest inflows in 17 weeks.  Continued softness in developed world economic activity combined with last week’s IEA coordinated emergency oil reserve release have pushed oil prices down sharply. ETP investors, however, appear to view the price falls as an opportunity to increase exposure, boosting inflows into ETFS oil ETPs by nearly $70mn last week. Investors appear to again be range trading oil, only now with a MENA political risk premium added in. ETFS Crude Oil (CRUD) experienced the largest inflows since May 2010, up $59mn last week. ETFS Leveraged Crude Oil (LOIL) received inflows of $35mn last week, the largest in 39 weeks.

            Fresh record inflows into ETFS Leveraged Wheat (LWEA) of $15.5mn.
              Investors appear to be looking to take advantage ofcontinued price weakness as an opportunity to increase strategic exposures to the agricultural sector. Prices across much of the agricultural sector remained under pressure last week after the announcement by the G20 of an agreement on data sharing activities and initiatives to encourage production  to reduce food price volatility. The World Bank also announced its intention to provide funds to emerging market countries to hedge their trading activities in agricultural produce in order to offset the rising cost of food provision. Meanwhile, better weather conditions in the US Midwest have reduced price risk premiums associated with poor crop harvests. Wheat has been the main focus for investors with ETFS Wheat (LWEA) receiving $7.2mn inflows last week.

            Source: ETFWorld – ETF Securities Commodity ETP Weekly

             

            – Valuesabove100% indicatean above average turnover compared to either the prior 30 trading days or the prior 260 trading days.