Oil prices fell Monday after tensions flared between the U.S. and China, and a Hong Kong fund designed to track the crude market said chaotic trading conditions had forced it to revamp its holdings.
Futures that are due to deliver U.S. crude oil in June dropped 5.3% to $18.74 a barrel, falling alongside stocks after the Trump administration stepped up assertions that the coronavirus originated at a laboratory in Wuhan. Brent crude futures for settlement in July, the benchmark in international oil markets, fell 2.4% to $25.81 a barrel.
The clash over how the pandemic started could spill into trade restrictions between the world’s two largest economies, analysts said, hurting economic growth and demand for raw materials. “This could turn pretty ugly,” said Ole Hansen, head of commodity strategy at Saxo Bank.
The decline erases part of a rally in oil prices last week, when traders said demand was slowly picking up following a collapse caused by the pandemic. The easing of lockdowns in some parts of the U.S. and Europe, coupled with the output cuts by oil-producing countries and companies, helped West Texas Intermediate prices snap a three-week losing streak.
Copper and soybean prices also fell Monday. The two commodities were highly sensitive to U.S.-China tensions before the signing of a phase-one trade deal in January. China accounts for around half the world’s consumption of industrial metals, and pledged to boost its purchases of U.S. agricultural goods by $32 billion under the agreement.
An oil pump jack near Williston, N.D.
Photo: andrew cullen/ReutersPossibly exacerbating the pressure on oil: Samsung Asset Management (Hong Kong) Ltd. said it was restructuring holdings in an oil exchange-traded fund. The Samsung S&P GSCI Crude Oil ER Futures ETF trades in Hong Kong, manages HK$3.97 billion ($512 million) in assets and aims to track U.S. crude futures.
WTI futures plunged below zero for the first time in April, prompting sweeping changes at ETFs that give investors an easy way to bet on oil markets. Traders say selling by these funds, which had accumulated large positions in the U.S.-crude futures, contributed to negative prices.
The Samsung S&P GSCI Crude Oil ER Futures ETF will sell around two-thirds of the futures it currently owns, which are due to deliver U.S. crude in September, according to an exchange filing. It will buy futures for delivery in October and December to replace them. It is the second time in recent weeks that the fund has shifted holdings to longer-dated contracts.
The aim is to avoid getting caught holding hundreds of millions of dollars’ worth of a single futures contract as it approaches expiration. If the price of that contract fell below zero, the fund would be worthless. The Samsung fund said its clearing broker, which it didn’t name, instructed it to buy put options that act as a form of insurance against negative prices.
Other retail oil funds have made similar changes, lowering their exposure to futures contracts that are due to deliver oil in the coming months. These are seen as risky to own because the glut of oil due to the coronavirus has weighed on near-term prices.
United States Oil Fund LP, the biggest oil ETF, now holds 10% of its assets in crude futures for delivery and settlement in June next year.
The changes were necessary because oil ETFs had become “a massive bull in the china store,” said Saxo Bank’s Mr. Hansen.
Write to Joe Wallace at Joe.Wallace@wsj.com
Copyright ©2019 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
"Oil" - Google News
May 04, 2020 at 07:12PM
https://ift.tt/2yguDfZ
Oil Prices Drop as U.S.-China Tensions Flare - The Wall Street Journal
"Oil" - Google News
https://ift.tt/2SukWkJ
https://ift.tt/3fcD5NP
Bagikan Berita Ini
0 Response to "Oil Prices Drop as U.S.-China Tensions Flare - The Wall Street Journal"
Post a Comment