uploads///Fund flow

$24 Billion Question: Has Crude Oil Hit Rock Bottom?


Oct. 8 2020, Updated 1:14 p.m. ET

Crude oil ETFs

The latest fund flow data suggest that around $24 billion has gone into oil ETFs in the last 18 months. This suggests that oil investors see a bottom for crude oil prices or they are taking advantage of bottom fishing. Crude oil prices are trading below their break-even and production costs.

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Crude oil and gas ETFs

In the last 18 months, $12 billion has been invested in ETFs tracking the performance of oil and gas exploration and production companies, refiners, and midstream companies. The Energy Select Sector SPDR Fund (XLE) and the Vanguard Energy ETF (VDE) have seen inflows of $5.6 billion and $2 billion, respectively, in the last 18 months.

ExxonMobil (XOM), Chevron Corporation (CVX), Schlumberger (SLB), and Kinder Morgan (KMI) account for 15.8%, 13.2%, 7.2%, and 4.6%, respectively, of XLE. ExxonMobil, Chevron Corporation, and Schlumberger account for 24%, 12%, and 7%, respectively, of VDE.

Meanwhile, US crude oil futures–tracking ETFs have seen inflows of $12 billion in the last 18 months. The United States Oil Fund (USO), which tracks near-month NYMEX oil futures, saw inflows of $4.2 billion for the same period. Similarly, the VelocityShares 3x Long Crude Oil ETN (UWTI), which tracks leveraged oil futures, saw fund inflows of $2.6 billion for the same period.

Despite the catastrophic fall in crude oil prices and the fact that companies like Swift Energy Company (SFY), Energy XXI (EXXI), Halcón Resources Corporation (HK), and Goodrich Petroleum Corporation (GDP) are on the verge of bankruptcy, investors are looking for a bottom for oil prices. In the final part of this series, we’ll explore crude oil price projections for 2016.


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