Crude oil futures fell below $40 per barrel for the first time since April as the energy market dips deeper into a bear market. Oil exchange traded fund traders, though, are not shying away from the fall.
The United States Oil Fund (NYSEArca: USO), which tracks West Texas Intermediate crude oil futures, attracted $126.6 million in net inflows over the past week, the best inflows since February, according to Bloomberg.
The inflows suggest that oil traders are trying to time a market bottom after USO dropped into bear market territory last week.
Alternatively, the rising inflows may also indicate increased bearish activity as short traders bet on continued weakness in the oil ETF – hedge funds raised their short positions in WTI by 38,897 futures and options combined during the week ended July 26, the largest gain since data was kept from 2006, Bloomberg reports.
SEE MORE: Crude Oil ETF Slips to Bear Market
Crude oil continued to decline Monday after a survey showed output in Organization of Petroleum Exporting Countries hit record highs last month and the U.S. energy industry added the largest amount of oil rigs in two years.
On Monday, USO fell 3.5% and the United States Brent Oil Fund (NYSEArca: BNO), which tracks Brent crude oil futures, dropped 3.0%.[related_stories]
Meanwhile, WTI crude oil futures were down 3.7% to $40.07 per barrel and Brent crude was 3.33% lower to $42.08 per barrel.
Additionally, the energy was the worst performing S&P 500 sector Monday, with the Energy Select Sector SPDR (NYSEArca: XLE) falling 3.1%.
“I’m very bearish,” Thomas Finlon, director of Energy Analytics Group LLC, told Bloomberg. “We’re awash in crude and gasoline.”
SEE MORE: Dollar, Oil ETFs set to Clash
OPEC output is rising as Iraq pumps out more and Nigeria produced additional crude exports despite attacks on oil installations, Reuters reported.
Saudi Arabia also maintained output close to record highs as the top OPEC exporter tries to maintain market share and meets seasonally higher domestic demand.
Further fueling the oversupplied outlook, U.S. oil drillers added 44 rigs in July, the most in a month since April 2014, with the rig count going up eight times in nine weeks.
For more information on the crude oil market, visit our oil category.
United States Oil Fund