Oil exchange traded funds slipped Tuesday, with Brent crude falling to a 14-month low, as traders weighed concerns over the global economy, notably conditions in the Eurozone and China, and a seasonal shift.
The United States Brent Oil Fund (NYSEArca: BNO) decreased 2.5% Tuesday while the United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate oil futures, fell 2.9%. Year-to-date, BNO is down 7.2% and USO is up 1.3%.
For the more aggressive trader, the ProShares UltraShort Bloomberg Crude Oil (NYSEArca: SCO) tries to reflect the two times inverse, or -200%, daily performance of WTI crude oil and jumped 5.7% Tuesday. SCO is up 8.8% over the past three months but has declined 8.9% year-to-date.
WTI crude oil futures dipped 2.9% Tuesday to $93.2 per barrel while Brent oil futures fell 2.0% to $100.7 per barrel and touched $100.43, their lowest since June 2013. [Poor Fundamentals Drag Down Oil ETFs]
“Concern about global economic conditions, primarily in Europe and China, is pushing oil lower,” Gene McGillian, an analyst and broker at Tradition Energy, said in a Wall Street Journal article. “The weak gasoline prices seem to be weighing on the whole complex.”
Oil prices were weakening on concern over the slowdown in manufacturing from Europe to China and the possible decline in demand.
Moreover, crude oil prices were experiencing a seasonal sell-off after the post-holiday momentum wore off.
“It’s the typical post-holiday selloff,” Stephen Schork, president of the Schork Group Inc., said in the article. “We are going into refinery turnaround pretty soon. All that bullish exuberance has been exorcised out of the market right now.”
Between September and October, refineries shift from summertime gasoline output to winter fuels production.
“Going into the fourth quarter, energy is generally weaker,” Rich Ilczyszyn, chief market strategist and founder of Iitrader.com, said in the article. “We know there is plenty of supply, so on the supply side the market will remain bearish.”
Additionally, crude inventories were at 360.5 million barrels for the week ended August 22, near their highest level for this period of the year since 1990.
United States Oil Fund
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Max Chen contributed to this article.