Petroleum oil tankers and related shipping industry exchange traded fund plunged Monday as oil prices slide to a five-year low.
The Guggenheim Shipping ETF (NYSEArca: SEA) fell 4.4% Monday. SEA has declined 16.5% over the past three months.
Shipping stocks sank Monday as West Texas Intermediate crude oil futures dipped to $63.3 per barrel and Brent crude oil futures fell to $66.4 per barrel, a five-year low.
Oil prices are falling on concerns that Hedge funds and other money managers may have bet too much on rising prices, reports Rupert Rowling for Bloomberg.
“The near-term risk is for additional long-liquidation,” Ole Hansen, head of commodity strategy at Saxo Bank A/S, said in the Bloomberg article. “The belief is spreading that we could hit $60 or even lower before this stabilizes.”
Consequently, the low oil prices and energy sector slump are dragging on shipping stocks, according to TradeWinds.
Notably, Knightsbridge Shipping Limited (NasdaqGS: VLCCF) plummeted 11.4% Monday. Ship Finance International (NYSE: SFL), which is exposed to dry bulk, rigs, offshore vessels and other related sectors, decreased 11.1% Monday. SEA includes a 1.2% weight toward VLCCF and 3.4% to SFL.
“Unless something unexpectedly positive happens with oil prices, we believe there will be a sharp falloff in rig activity,” according to investment bank Global Hunter Securities.
While the shipping ETF may move with the Baltic Tanker Dry Index (BCIY), SEA does not specifically transport dry bulk commodites. SEA tracks the Dow Jones Global Index, a collection of dividend-paying global shipping firms. The ETF includes a 37.0% tilt toward the energy-related industries.
Instead, SEA investors should follow the Baltic Tanker Dirty Index (BDIY). The index aggregates rates from major trade routes every day and is a good indicator of overall shipping rates hired to move crude oil. [Shipping ETF Trouncing Baltic Dry Index]
Guggenheim Shipping ETF
For more information on the shipping industry, visit our shipping category.
Max Chen contributed to this article.