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"They Don't Want To Get Burned Again" - Oil ETF Sees Biggest Outflows In 6 Years

Tyler Durden's picture




 

"The oil rebound has run out of gas and now you are seeing nervous investors with itchy trigger fingers bailing out of USO," notes Bloomberg, as the biggest US ETF that tracks oil is heading for the largest two-month outflow in six years, raising concern that crude’s 30% rally may stall. As BNP points out, "we do not think that the bulls have enough supporting fundamental factors to make a case for a higher oil price," and judging by the mass exodus from USO, as Bloomberg concludes, knife-catching 'investors' "don’t want to get burned by another drop in oil."

 

 

As Bloomberg reports,

Holders of the United States Oil Fund, known as USO, have withdrawn almost $1 billion so far in April and May, according to data compiled by Bloomberg. Crude dropped about $12 a barrel after a $1.4 billion exodus from the fund in the two months ended June 2009.

 

Oil has rebounded from a six-year low in mid-March on speculation that the falling number of drilling rigs will reduce output. U.S. crude stockpiles near the highest level in 85 years and OPEC’s refusal to cut production will continue to weigh on prices, according to Goldman Sachs Group Inc., Deutsche Bank AG and Citigroup Inc.

 

...

 

The U.S. Oil Fund was at $19.56 Thursday, up from a record low of $15.96 on March 17. USO, which holds about 10 percent of the front-month July WTI contracts, jumped 22 percent in April and is down 4.6 percent so far this month. The ETF’s performance is trailing oil because the market is in contango, meaning futures for delivery in later months trade higher than nearby contracts. The structure erodes gains as the ETF sells the expiring contract and buys the more expensive next-month futures.

 

...

 

The Organization of Petroleum Exporting Countries, which supplies about 40 percent of the world’s oil, meets June 5 in Vienna to discuss output policy. The group will maintain its production target, Mohammad Oun, Libya’s deputy vice prime minister for energy, said Thursday, joining Kuwait in predicting no policy change.

 

“We do not think that the bulls have enough supporting fundamental factors to make a case for a higher oil price,” Harry Tchilinguirian, BNP Paribas SA’s London-based head of commodity markets strategy, said Thursday. The supply surplus will push oil down to “$55 and then possibly lower,” he said.

*  *  *
As one analyst concluded,

“Investors were anticipating a bounce and they started selling as soon as it happened... People are cashing in some of their short-term chips.”

Indeed they are - at the fastest pace since the financial crisis.

 

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Fri, 05/29/2015 - 15:12 | 6144687 Ancona
Ancona's picture

Fundamental Factors?? When the hell did that start to mattrer?

Fri, 05/29/2015 - 15:16 | 6144704 Hippocratic Oaf
Hippocratic Oaf's picture

Picked up a lot of profit on crude related bonds. Sold a lot of positions today.

Buy the next dip

Fri, 05/29/2015 - 15:26 | 6144700 saints51
saints51's picture

Take a look at ZH 4pm ish eastern time daily market wrapup post. You will see a chart of the ramp up in crude like you have not seen in a long time. The last 30 minutes was a sell off and 2 gap fills today.

This is becoming an epic bubble and it is ready for poppin'.

Fri, 05/29/2015 - 15:16 | 6144701 wrs1
wrs1's picture

But it's at $20.50 today and WTI is over $60 again.

Is Cushing full yet? When do we get $20 oil? Looks like the shorts got butt fucked again expecting that build and got hosed by the drawdown on lower imports.

Fri, 05/29/2015 - 15:24 | 6144727 saints51
saints51's picture

nah yesterday close told you exactly how this would play out. Pretty epic gap fill I will admit today. Figured it may take a few sessions but they managed to do it today with robots firing on all cylinders. They are setting you and other small players up for theft and will laugh when you are homeless. Be smart in this time. Repo man loves a Porsche.

Fri, 05/29/2015 - 18:22 | 6145360 wrs1
wrs1's picture

Solid bounce off the 50dma on USO, this is the second test of it and the 50dma is moving higher the whole time.  Right now we have a weekly close over $60 on WTI.  That's all pretty bullish.  It's clear there are trapped shorts out there with all this negative news on oil but positive price and technical action. News is lies, price and technicals are the truth.

Fri, 05/29/2015 - 15:29 | 6144744 Bell's 2 hearted
Bell's 2 hearted's picture

iraq ramping production from 3.1 million barrels/day to 3.5 million barrels/day by years end

 

US increasing production (rig count be damned)

 

O makes deal with iran?

 

global slowdown

Fri, 05/29/2015 - 15:35 | 6144764 Atomizer
Atomizer's picture

WTI is always priced higher. They use a unique pull of currency basket. They are the laughing stock of oil index pricing. 

Fri, 05/29/2015 - 15:16 | 6144702 ZippyBananaPants
ZippyBananaPants's picture

if these idiots are selling, I am buying

Fri, 05/29/2015 - 15:21 | 6144722 Bell's 2 hearted
Bell's 2 hearted's picture

increased production + slumping demand =

 

good luck, crude bullz

Fri, 05/29/2015 - 15:22 | 6144724 disabledvet
disabledvet's picture

It's not just the amount of oil in storage but simply put the world's largest consumer by far (the USA) is using way less.

 

If the money wasn't so worthless this would show up in actual price...but, hey...the politicians aren't complaining so why would Wall Street?

Fri, 05/29/2015 - 15:31 | 6144747 Atomizer
Atomizer's picture

The right hand, another shout out of peak oil and climate change. 

The left hand is disabling the US reserve currency. We must adhere to a cashless society. Or else. 

Fri, 05/29/2015 - 16:05 | 6144889 Meremortal
Meremortal's picture

Since I have an investment horizon longer than that of a gnat I'm picking up strong dividend paying oil companies on the dips.

Fri, 05/29/2015 - 17:54 | 6145263 SweetDoug
SweetDoug's picture

'

'

'

So with a billion withdrawn, you'd expect the price to go down, as there's got to be somebody on the other side of the trade, doesn’t there?

 

https://ca.finance.yahoo.com/echarts?s=USO#symbol=USO;range=1m

 

So the price of USO has gone from $16 March 16, to about 20 bucks now?

 

Can sombody explain this non-story??

 

•?•
V-V

Fri, 05/29/2015 - 18:23 | 6145365 Fed-up with bei...
Fed-up with being Sick and Tired's picture

Just take the highs and subtract the lows and divide it in two and add it to the lows.  THERE is your resistance point and it is POSSIBLE we can rebound to it.

 

I trade crude using Measured Moves.    Easy as pie.   $5800 in long profits just today, 20 contracts.

Fri, 05/29/2015 - 20:55 | 6145773 long-shorty
long-shorty's picture

do you sell a DVD I can buy?

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