February another bumper month for oil ETPs: BlackRock

[March 11, 2015] By Claire Milhench

LONDON (Reuters) - Interest in oil and other energy-related exchange traded products (ETPs) continued for a fifth consecutive month in February with almost $2 billion of inflows, according to the latest global data from BlackRock, pushing assets under management (AUM) to over $13 billion.

This was almost as much as the $13.8 billion of assets under management in broad-basket commodity ETPs, but BlackRock's Ursula Marchioni, head of ETP research at iShares EMEA, said it fell short of a record.

"At year-end 2009 global energy ETPs had a total AUM of $14 billion as the underlying energy prices were higher at that time," she said. Energy was the best performing sector in the S&P Goldman Sachs Commodity index in February, with Brent oil up 14.9 percent.

Marchioni said that if this price trend continued in the coming months, energy ETPs could reach historical highs in total assets under management.

Investors piled into oil ETPs after Brent sold off in 2014, in the hope of taking advantage of an eventual rebound in prices. "For Brent, there's a lot of reliance on OPEC pulling back production at some point," Nitesh Shah, associate director at ETF Securities, said.

But there has also been an increase in flows into the company's short WTI crude ETPs in the last week, Shah added, suggesting some investors are taking a contrarian view. "That's largely related to the inventory builds at Cushing – investors see an opportunity to take a tactical short," he said.

U.S. crude stocks at the key delivery point of Cushing, Oklahoma, hit fresh record highs in February as shale oil production continued unabated.

Broad-basket commodity ETPs attracted some $329 million in net inflows in February, a reversal from January's $300 million of net outflows, which Marchioni said had been driven by one U.S.-listed product.

"As long as the crude price stabilizes in the next few months we expect to see some renewed interest in broad-market commodity ETPs given the significant weight energy has within these broad market indices," she said.

Gold ETPs attracted $1.1 billion, with European investors seeking a store of value following the quantitative easing program announced by the European Central Bank. This has added to the depreciation pressure on the euro relative to the U.S. dollar, Marchioni said.

Shah also cited uncertainty around Greece and the renegotiation of its debt payments.

(Editing by Greg Mahlich)

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