As oil prices surge past $80, investors in oil ETFs are cashing in and pulling out.
Overall, oil ETFs have recorded the largest single-week outflows in over a year. According to Bloomberg data, a basket of products made up of 14 oil ETFs registered total outflows exceeding $400 million last week, the largest outflow since March 2022.
Among them, the largest oil ETF - WisdomTree's Brent Crude Oil ETF - saw outflows that set a record since the establishment of the ETF. This ETF became the largest product in its field in January this year. In just one day last week, investors withdrew nearly $200 million from the ETF.
It's worth mentioning that the scale of WisdomTree's Brent Crude Oil ETF has expanded rapidly. Investors began pouring into the ETF at the end of last year, driving its assets under management from about $200 million in December of the previous year to more than ten times that level now. Hence, the record level of withdrawals is not surprising.
Since its explosive growth in December last year, WisdomTree's oil ETF has been trading in the range of 40-49.66. The ETF traded between 46.71 and 48.53 last week, closing on Monday at 49.40. This means that most of those who bought in at the bottom made a profit.
Another well-known ETF - the United States Oil Fund (USO) - recorded its largest single-week outflows since December last year. Other similar ETFs also saw large-scale withdrawals.
Thanks to a robust demand outlook, OPEC+ production cuts, and trader bets that the Federal Reserve's rate hikes may soon end, boosting confidence in the macroeconomic outlook, oil prices made a strong rally in July, extending gains from June. WTI oil climbed 15.8% in July, marking its best monthly gain since January of the previous year, while Brent rose 14.2%, its best monthly rise in over a year. On Monday of this week, oil prices rose again, climbing more than 1%, following five consecutive weeks of gains.
Against the backdrop of rising oil prices, by the close on Monday, WisdomTree's Brent Crude Oil ETF was up 21% from its May low. The United States Oil Fund (USO) was up about 22% from its May low.
In the futures market, according to data from the Commodity Futures Trading Commission (CFTC), bullish sentiment for crude oil hit a three-month high in the week ending July 25. This data is a few days lagging compared to the ETF data mentioned above.
Specifically, in the week of July 25, speculators increased their net long positions in NYMEX WTI crude oil by 18,819 contracts to 192,104 contracts, a three-month high. Net long positions in Brent and WTI crude oil increased by 29,392 contracts to 374,967 contracts, also a three-month high.
