Sharp oil rally creates winners and losers

Desert oil pumps1The biggest weekly gain in Brent crude prices since 2011 caused inflows for exchange-traded funds (ETFs) which track the oil price, but left some commodity managers with losses. Two oil ETFs from ETF Securities gained $80 million in net inflows as violence in Libya, strong US labour market data and a pullback in US shale production conspired to push the Brent crude price up to more than $58 a barrel. Although this price is still far below the $100-plus levels seen in 2013, it represents a substantial rally from two weeks ago, when Brent crude was trading at less than $50. The rise in oil prices is good for oil-exporting nations such as Saudi Arabia, Kuwait and the UAE. However, data from a research unit of French asset manager Lyxor that many hedge fund managers were wrong-footed by the rally, and lost money. Philippe Ferreira, head of research at Lyxor's managed account platform, says "many CTA [commodity trading adviser] and commodity managers were still short energy and subsequently witnessed losses". Ferreira adds that several managers could be exposed if oil prices continue to rise and predicts that many CTA funds will adjust their short energy positions in the coming weeks. ©2015 funds global mena

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