The recent fall off in the energy market pushed oil prices briefly into bear market territory. However, exchange traded fund traders largely missed out on the bearish turn.
Over the past week, the United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, fell 9.1%.
Meanwhile, the United States Short Oil (NYSEArca: DNO), which tracks the opposite moves of the West Texas Intermediate crude oil futures, rose 9.1% and DB Crude Oil Short ETN (NYSEArca: SZO), which tracks the simple inverse of oil, gained 8.8% over the past week. Additionally, for leveraged options, the ProShares UltraShort Bloomberg Crude Oil (NYSEArca: SCO), which tries to reflect the two times inverse or -200% daily performance of WTI crude oil, increased 18.4% and DB Crude Oil Double Short ETN (NYSEArca: DTO), which also follows a -200% performance of oil, jumped 17.4%. Lastly, the VelocityShares 3x Inverse Crude (NYSEArca: DWTI), which takes the three times inverse or -300% performance of crude oil, surged 27.9%. [Investors Capitalize on Oil Swings with Leveraged ETFs]
However, ETF investors have been pulling out of the inverse oil options over the past week. For instance, DWTI saw $32.0 million in out flows over the last five trading sessions, DTO experienced $13.2 million in redemptions and SCO lost $30.8 million in assets, according to ETF.com.
Oil futures briefly dropped into bear market territory Tuesday before paring losses toward the end of the day. Since the May 6 high, USO fell as much as 21.1% Tuesday and United States Brent Oil Fund (NYSEArca: BNO) declined as much as 22.4%. [Oil ETFs Slide Back Into Bear Market]
A number of factors have been contributing to the lower oil prices, including rising from the U.S. and Organization of Petroleum Exporting Countries, potential increase in exports from Iran, a stronger U.S. dollar, weakening China outlook and lower institutional interest.
“There has been a lot of money looking to pile into the short-side, and there have been an accumulation of different triggers to cue that over a short time. Some were looking at Iran; for some it is macro spill overs from Greece or China; for others it’s a pure dollar play, and for others the rise in U.S. rig counts,” Paul Horsnell, head of commodities at Standard Chartered, said in a CNBC article. “None of those work in isolation, but put them all together in a short period and they’ll do it. And after that, the technicals kick in to give a further push down.”
For more information on the oil market, visit our oil category.
Max Chen contributed to this article.