Industry Updates

Outflows for Europe’s largest oil ETP following creations suspension

Tom Eckett

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The $2.6bn WisdomTree WTI Crude Oil ETP (CRUD), Europe’s largest oil exchange-traded product, is seeing outflows for the first time in months following the decision to temporarily suspend creations.

According to data from Ultumus, CRUD has seen $234m outflows over the past two weeks following months of inflows as bullish investors bet on rebounding oil prices.

In April, for example, there were over $1bn inflows into CRUD before WisdomTree announced a temporary halt to creations on 30 April.

Therefore, CRUD can continue to trade on the secondary market however authorised participants are unable to create new shares meaning the ETP cannot gather inflows.

WisdomTree said the decision to suspend creations was due to “unprecedented levels of volatility” in WTI crude oil contracts which fell to as low as $-40 a barrel on 21 April.

The future of many oil ETPs are in doubt as brokers have started refusing to facilitate futures contracts purchases due to the risks involved.

WisdomTree has already been impacted by broker action after it was forced to close eight oil ETCs last week after its swap provider, Shell Trading Switzerland, terminated the purchase agreements.

Meanwhile, the $4.5bn United States Oil Fund (USO), the world’s largest oil ETP, is looking for another broker after an SEC filing last Thursday revealed RBC Capital Markets stopped it from buying more oil futures.

ETF Insight: How historic market volatility changed oil ETPs forever

As oil prices tumbled, many ETF issuers and index providers moved their exposure away from front-month futures contracts in a move to protect investors from being wiped out.

CRUD, for example, has seen its strategy adjusted after Bloomberg rolled the WTI July contract to September on the underlying index on 24 April.

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