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 Some $540 million exited energy ETPs globally last month, following
net withdrawals of $1.2 billion in April, data from asset manager
BlackRock showed.
Investors piled into oil ETPs in the first quarter chasing an oil
price rebound. But Brent crude futures prices slipped just over 2
percent in May, and some investors decided to take profits ahead of
a potentially much bigger downward correction.
"The gains were getting a bit ahead of themselves given the elevated
inventory levels," said Martin Arnold, global commodity and FX
strategist at ETF Securities, an issuer of ETPs.
He noted that OPEC had not cut production, with Saudi Arabia raising
output to a record high of around 10.3 million barrels per day (bpd)
in May.
Meanwhile, demand has failed to pick up enough to work through the
millions of barrels of oil in storage on land and at sea.
"We think there is some near-term weakness to come in oil prices -
there is a greater risk of downside at the moment, so the
profit-taking is pretty pragmatic," said Arnold.
The data also showed investors beginning to tilt back toward
industrial metals and broad basket commodity ETPs, which attracted
net inflows of $163 million and $430 million respectively in May.
Arnold said that ETF Securities had seen strong inflows into its
aluminum and broad basket industrial metals ETPs, but copper
products had experienced outflows.
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In terms of price performance, industrial metals was the
worst-performing sector in the S&P GSCI in May, dropping 7.9
percent, and aluminum was the worst-performing commodity, sliding 11
percent.
This suggests tactical investors are targeting metals that look
oversold and where fundamentals are becoming more supportive. "The
risks to supply offer a decent buying opportunity - virtually across
the sector you are seeing inventories fall," Arnold said.
Agriculture ETPs attracted a net $143 million, their strongest
performance for over a year. Arnold said softs such as coffee and
sugar had seen some decent inflows.
He linked this to a number of weather-related factors, such as the
potential for frost damage sparking fears of a lower coffee harvest
in Brazil. He also cited reports of potential damage to the winter
wheat crop and an ongoing El Nino effect, which is likely to reduce
yields year-on-year.
(Editing by Susan Fenton)
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