Industry Updates

WisdomTree lifts creations suspension on Europe’s largest oil ETP as market volatility subsides

Tom Eckett

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WisdomTree has reopened creations on Europe’s largest oil exchange-traded product (ETP), in a sign of increasing stability within the oil market.

The ETF issuer suspended creations on its $1.7bn WisdomTree WTI Crude Oil ETP (CRUD) on 30 April amid “unprecedented levels of volatility” in the oil market.

The move came as investors continued to pile into CRUD in an attempt to capture the rebound in oil prices despite WTI trading as a low as $-37 a barrel on 21 April.

Following the suspension, authorised participants were unable to create new shares on CRUD meaning the ETP could not see inflows.

Regulators on notice as ETPs exacerbate volatility in oil markets

The decision has now been reversed, as of 1 July, meaning there is no longer a finite number of shares trading on exchange. As a result, CRUD is currently trading at 1.09% discount, as of 13 July.

WisdomTree said in statement: “With the lowering of volatility in oil markets, WisdomTree WTI Crude Oil has reopened, and is accepting applications from authorised participants for new creations.

“WisdomTree and its counterparties have worked together closely and determined that the risks, facing security holders during the extreme and unprecedented levels of oil market volatility, have reduced sufficiently for the product to re-open to new creations.”

Oil ETPs came under huge pressure following unprecedented levels of volatility in WTI contracts.

After the May contract traded below $0 a barrel, ETF issuers and index providers ignored the products’ strategies by rotating into later dated contracts in order to protect investors from being wiped out.

Following the volatility, brokers started refusing to facilitate oil futures contracts purchases due to the risks involved.

On 21 May, an SEC filing revealed RBC Capital Markets had stopped the world’s largest oil ETP, the United States Oil Fund (USO), from buying more oil futures.

ETF Insight: How historic market volatility changed oil ETPs forever

Furthermore, WisdomTree was forced to close eight oil ETCs in May after its swap counterparty, Shell Trading, terminated the agreement.

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