Energy ETPs attract $191 mln in June on Iraq supply fears

Tue Jul 8, 2014 5:38am EDT

By Claire Milhench
    LONDON, July 8 (Reuters) - Energy exchange-traded products
(ETPs) attracted almost $200 million in June as investors moved
into crude oil after civil war broke out in Iraq, the latest
monthly flows data from asset manager BlackRock showed.
    Worries that Iraq's crude exports would be disrupted by
violence have proved largely unfounded to date, but the rapidity
with which Islamist militants seized territory in the north and
west last month alarmed the market, driving up futures prices.
    The S&P GSCI Energy index was up 3.2 percent in June, with
Brent up 3.8 percent and unleaded gasoline up 3.6 percent.
    "The bulk of the energy flows went into crude oil ETPs, and
most of that went into Brent-tracking products," said Nick
Brooks, head of research and investment strategy at ETF
Securities, an issuer of ETPs.
    "The main reason for that was the deterioration of the
situation in Iraq which came as a surprise to markets."
    ETPs, whose value is linked to moves in their underlying
assets, offer an easy route into commodities for investors and
allow asset allocators to make quick, tactical changes to their
portfolios.
    With $191 million of inflows, energy futures ETPs were the
only commodity futures ETPs to record inflows in June. For the
year to date, they had net inflows of $33 million. 
    Energy equity ETPs also attracted strong flows of $1.4
billion in June, with $8.2 billion of inflows in the first half.
This was the strongest inflow for sector equity ETPs globally.
    "The main drivers included the strength of energy commodity
prices this year  - crude oil mostly - and investors' continued
hunt for yield," said Ursula Marchioni, head of ETP research
EMEA at BlackRock's iShares. 
    Energy bucked the trend as the other commodity ETP segments
experienced outflows or were flat on the month. Total commodity
ETP outflows amounted to $392 million in June, with $837 million
of outflows in the first half of the year.
    
    GOLD ENDS MONTH FLAT
    Inflows into U.S.-listed gold ETP products were offset by
outflows from European products. U.S.-listed gold ETPs had $317
million of inflows in June, whereas Europe-listed gold ETPs had
outflows of $325 million, BlackRock said.
    Precious metals were the second best performing sector in
the S&P GSCI, with gold up 6.1 percent and silver up 12.5
percent in June as a result of geopolitical tensions and a
weakening dollar, S&P Dow Jones Indices said.
    "A safe haven asset, the gold price rallied significantly in
June," said Marchioni. This was partly influenced by the Iraqi
and Ukrainian crises. "Investors may have followed the momentum
or endorsed the contrarian view and taken their profits."
    She added that for some European investors, the ECB's
decision in early June to cut rates resulted in a more stable
euro/dollar rate. 
    "European investors who used gold to hedge against
short-term euro FX movements ahead of the ECB decision may have
taken some of their profits with the gold price in euros
recovering in late June," she said.
    Agriculture ETPs lost $126 million in June and are down $404
million on the year - the biggest sector outflow after gold. 
    The June redemptions were fuelled by a forecast for a bumper
corn harvest in the United States, which will leave inventories
at very healthy levels over the coming winter, Ole Hansen, head
of commodity strategy at Saxo Bank, said. 
    Industrial metals ETPs attracted the most inflows in the
first half at $264 million, with only modest outflows in June.
    Brooks said that diversified industrial metals ETPs were
benefiting from a rebound in Chinese demand growth, although
copper ETPs have suffered due to an investigation into
irregularities at Qingdao's bonded warehouses in China.
 
    At the end of June, BlackRock's data covered 911 commodity
ETPs worldwide, worth some $126 billion. 
    
    Global commodities at end-June (US$ mln)
 SECTOR                   JUNE FLOWS  YTD FLOWS   JUNE ASSETS
 Broad/Diversified        -140        -64         18,130
 Agriculture              -126        -404        4,843
 Energy                   191         33          7,412
 Industrial Metals        -6          264         2,143
 Gold                     0           -829        72,759
 Silver                   -247        187         12,208
 Precious Metals Total    -311        -665        93,817
 TOTAL COMMODITIES        -392        -837        126,346
 Source: BlackRock

 (Reporting by Claire Milhench, editing by David Evans)
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