Heating oil and gasoline ETPs hit two-year highs in Hurricane Harvey’s wake

Sep 5th, 2017 | By | Category: Commodities

Harvey, the first category three hurricane to make landfall in the US since 2005, has sent the prices of ETPs tracking heating oil and gasoline to their highest levels since summer 2015 after the storm damaged a third of US oil refineries when it swept through the Gulf Coast at the end of August.

Hurricane Harvey ETFs ETF Securities

ETPs tracking heating oil and gasoline have reached two-year highs following damage to oil refineries in the US caused by Hurricane Harvey.

London-based ETF Securities has reported that the ETFS Gasoline (LON: UGAS) and ETFS Heating Oil (LON: HEAT) rose in value by 6.9% and 6.3% respectively over the week to 1 September 2017. UGAS has approximately $5 million in assets under management (AUM) while HEAT holds roughly $4m. Each has a management expense ratio (MER) of 0.49%.

Natural gas also did well over the week with the ETFS Natural Gas (LON: NGAS) rising 6.2%. ETF Securities credits the commodity’s performance to the return from rolling the underlying contract while the futures curve is steeply in contango. NGAS has AUM of approximately $52m and a MER of 0.49%.

Oil prices, on the other hand, barely moved from their current momentum with WTI falling 1.2% over the past week while Brent remained flat. After six weeks of outflows, ETF Securities’ oil ETPs recorded $5.8m inflows last week, mostly into short oil ETPs. According to Edith Southammakosane, multi-asset strategist at ETF Securities, these flows reflect investors’ views that oil prices will remain range-bound despite US domestic demand for oil remaining strong.

The largest net inflows for ETF Securities during the week were however recorded in the firm’s range of gold ETPs which collectively brought in $122m in net new assets. The largest is the ETFS Physical Gold (LON: PHAU) which has approximately $6.2bn in AUM; its MER is 0.39%.

Southammakosane notes: “Investors rushed into gold ETPs as North Korea is threatening further military tests near the US seas. Whilst the country has been demonstrating its military force since at least the 80’s, it has stepped up its provocations since the summer of 2016 when Kim Jong-un claimed that he can launch a missile capable of striking the US. Verbal provocations recently turned into military action with a North Korean missile overflying Japan on Tuesday morning.

“Allies have responded by another demonstration of force on Thursday as US bombers joined South Korea in a live-fire bombing exercise over South Korea. Russia and China, on the other hand, are pushing for diplomatic talks. The gold price rose by 2.6% on Tuesday, closing above $1,318/oz., the highest level since September 2016, before ending the week at US$1,320/oz.”

Elsewhere in precious metals, the ETFS Platinum (LON: PLTM) and the ETFS Silver (LON: SLVR) recorded outflows of $12.4m and $34.5m respectively which ETF Securities ascribes as being likely due to profit-taking as prices touched the highest levels since Q1 2017.

Copper ETPs recorded inflows on growing Chinese manufacturing activities in August. Southammakosane said: “China manufacturing PMI surprised the market to the upside while service and non-manufacturing PMIs grew at their lowest pace in four months as construction activity slowed down. Interestingly, the Caixin manufacturing PMI, released last Friday, also confirmed a pickup in in industrial activities at 51.6 against 51 expected and 51.1 in July. While the Chinese National Bureau of Statistics data focus on large to mid-sized companies, the Caixin manufacturing PMI tracks smaller and private businesses and therefore provides an independent reading from official numbers. We continue to expect Chinese data to beat expectations and support demand for industrial metals.”

ETF Securities offers the ETFS Copper (LON: COPA) which has $330m in AUM and a MER of 0.49%.

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