Investors Pile Into WTI Oil ETPs

December 09, 2014

Investors are pouring their money into WTI (West Texas Intermediary) oil exchange traded products amid low prices and a compelling commodity story in 2015.

The WTI (West Texas Intermediate) price dropped $4.75 to $68.94 – a four year low - at the end of November, as oil cartel OPEC failed to agree on production cuts in order to curb the current global crude oil oversupply.

Simona Gambarini, associate director of research and Martin Arnold, director and global FX and commodity strategist at ETF Securities, explained that investors are becoming increasingly optimistic about the oil outlook, with a fall in US stockpiles prompting ten weeks of consecutive weekly inflows into WTI ETPs. They predicted that, if prices remain persistently low, production will eventually be slashed by higher cost producers and the price of oil will rise.

“Although price weakness is likely to continue through the first half of 2015, continued growth from the US and China, combined with a reduction in oil supply, will eventually bring the oil market back to balance in our view with prices returning to trade around the US$90/bbl level,” their note said.

Investors are also putting their money into other energy ETPs. The natural gas price correction saw inflows into the products hit a 34-month high, as winter looms.  However, Sumit Roy, managing editor at www.HardAssetsInvestor.com, said in his podcast yesterday that oil continued to be the better investment market for the medium term, due to its global nature.

“I would prefer to focus on the oil producers rather than the natural gas producers, because oil is a global market and demand is going to continue to grow in China. A lot of non-OPEC producers and some OPEC producers (such as Venezuela, Russia and Nigeria) are going to be really constrained here with the low oil prices and they are going to see investment and supply decline, which will tighten up the market down the line.

There is also a strong case being made for commodities with Marc Faber, adviser and author of the Gloom, Doom and Boom Report, arguing that investors should have 25 percent of their portfolio in gold and possibly more as the price drops, creating a good entry point.

 

 

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