Industry Updates

WisdomTree to shut eight oil ETPs after broker terminates swap agreement

Tom Eckett


WisdomTree is

set to close a further

eight oil and one carbon exchange-traded products (ETPs) after its swap counterparty, Shell Trading Switzerland, terminated the purchase agreement.

Effective 22 June, WisdomTree Oil Securities will be closed entirely and all nine ETPs which trade under this umbrella will stop trading as a result.

The nine ETPs, which have around $550m assets under management (AUM), offer exposure to different Brent Crude and West Texas Intermediate (WTI) futures contracts and carbon.

They are:

  • WisdomTree Brent Crude Oil 1mth (OILB)

  • WisdomTree Brent Crude Oil 1yr (OSB1)

  • WisdomTree Brent Crude Oil 2yr (OSB2)

  • WisdomTree Brent Crude Oil 3yr (OSB3)

  • WisdomTree WTI Crude Oil 2mth (OILW)

  • WisdomTree WTI Crude Oil 1yr (OSW1)

  • WisdomTree WTI Crude Oil 2yr (OSW2)

  • WisdomTree WTI Crude Oil 3yr (OSW3)

  • WisdomTree Carbon (CARB)

WisdomTree said the last day of trading for these products is expected to be on or around 10 June.

A spokesperson from WisdomTree said: “Shell Trading Switzerland has decided to terminate its swap agreement with WisdomTree.

“The termination, which affects the WisdomTree Oil Securities Limited (OSL) product range only, is in accordance with its contractual rights, as set out in the products’ prospectus.

“WisdomTree continues to engage with specialist oil futures swap providers who have sufficient capacity and capability to manage positions through the volatility in the oil markets and mitigate the risks for investors.”

The decision from Shell highlights concerns from brokers around how ETPs trade in more volatile markets. On Thursday, the United States Oil Fund (USO), the world’s largest oil ETP, said its broker RBC Capital Markets had blocked it from buying any more oil futures.

Meanwhile, the $497m Samsung S&P GSCI Crude Oil ER Futures ETP (3175), the world's fifth largest oil ETP, was forced to suspend the creation of shares on 4 May after its broker refused to facilitate any increase in WTI futures contracts purchases.

Regulators on notice as ETPs exacerbate volatility in oil markets

This has also occurred with Europe's largest oil ETP, $2.6bn the WisdomTree WTI Crude Oil ETP (CRUD) which halted any further creations on 30 April.

The historic volatility in oil markets over the past few months has led ETF issuers and index providers to move away from front-month oil futures contracts amid concerns they could hit $0 a barrel again, effectively wiping out investor returns.

Despite the changes to the investment strategies, investors continue to pile into oil ETPs amid predictions prices will return to levels seen at the start of the year.

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