5 ETPs Hit By The Oil Price Tumble

October 29, 2014

The recent oil price slump of 26 percent from the end of June has hit energy focused exchange traded products as investors pull their cash out and the outlook doesn’t look good either.

As the price oil falls on the back of a rising U.S. and Saudi Arabian oil production – and a slowing global economy we list five ETPs that have felt the pinch.

db X-trackers STOXX Europe 600 Oil & Gas

This ETF, which is listed on the London Stock Exchange, has seen its net asset value drop 17 percent from 79.42 at the end of June to 65.88 at the beginning of this week.

The ETF is listed on the LSE and has an all in fee of 0.30 percent.

The STOXX Europe 600 Oil & Gas index includes companies involved in oil and gas exploration, production, integration, equipment, services and pipelines.

iShares Oil & Gas Exploration & Production UCITS ETF

The ETF, listed on the LSE, has seen its value fall 25 percent from the end of June to the beginning of this week. 11.096 – 8.255

The ETF tracks the performance of the S&P Commodity Producers Oil & Gas Exploration & Production Index as closely as possible. It includes the largest publicly-traded companies involved in the exploration and production of oil and gas from around the world.

ETFS Energy DJ-UBSCI ETC (AIGE)

This ETF Securities’ exchange traded commodity (listed on the LSE) has dropped in value by nearly 13 percent since June, going from 102.4 to 89.23 at the beginning of this week.

The ETC is swap-backed and gives investors exposure to a total return investment in a basket of commodity futures by tracking the Dow Jones-UBS Energy Subindex.

Market Vectors Global Unconventional Oil & Gas ETF (FRAK)

In an analyst note from Markit, the Market Vectors Global Unconventional Oil & Gas ETF (listed on NYSE Arca) has lost a fifth of its value as a result of oil’s recent tumble. This is 5 percent more than SPDR’s Energy Select Sector SPDR ETF (below), which tracks a wider energy producing sector.

Markit’s note said: “Investors were reluctant to pull funds from the ETF, but the recent rout in oil price has seen 10 percent of the fund’s investors head to the door.”

The note continued to explain that the constituents of the Unconventional ETF have also seen their shares come under renewed pressure from short sellers in the last three months. The average demand to borrow shares of its 66 constituents is up by over 9 percent in the last three months and now sits at 4.7 percent of shares outstanding. This appears to have been a shrewd move, as only two of the ETFs constituents have seen their prices appreciate in the last three months.

SPDR’s Energy Select Sector ETF (XLE)

The ETF, which is listed in the U.S. on NYSE Arca has slumped some 15 percent since June. It tracks the S&P Energy Select Sector Index, which includes companies from the following industries: oil, gas & consumable fuels and energy equipment & services. It has a gross expense ratio of 0.16 percent.

Added to these ETPs that have been hit by the oil drop, is the distinct possibility of a continued gloomy outlook.  Phil Flynn, senior energy analyst and a futures account executive at Chicago-based The Price Futures Group, told ETF.com yesterday that generally speaking, the trend is still down. “If you put a gun to my head, I'm bearish into the end of the year. But with winter coming, we could get a bit of a bounce.”

He added: “As far as the economy, the biggest threat into next year is what the Fed’s going to do. One of the pressures that we’ve seen on oil prices has been the rising dollar. Why has the dollar been rising? Because there's been this sense that the U.S. economy is doing a little bit better than everybody else, and the Fed may raise interest rates…. But in the rest of the world, the data has been weak, especially in Europe and China. There are significant challenges for the global economy. If the Fed doesn’t change course, we could see some more deflationary pressure on oil. And that would, of course, be bearish going into next year.”

 

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