Russian ETF Sees Biggest Outflow in a Year as Oil Prices Fall

Oil plummeted Friday after Russia and Saudi Arabia were quoted as increasing production. High oil prices are crucial for Russia’s vulnerable economy and the flow on was seen in Russia tracking ETFs which had avoided the emerging-market selling until now. Russia will be more circumspect going forward.

Oil plummeted Friday after Russia and Saudi Arabia were quoted as increasing production. High oil prices are crucial for Russia’s vulnerable economy and the flow on was seen in Russia tracking ETFs which had avoided the emerging-market selling until now. Russia will be more circumspect going forward.

Russian ETF

Bloomberg reported that investors began selling the biggest exchange-traded fund tracking Russian assets at the fastest pace in almost a year.

Redemptions from the VanEck Vectors Russia ETF, which invests in oil and gas companies including Gazprom PJSC, Rosneft PJSC and Lukoil PJSC, reached $88.9 million last week, the strongest since June 2017, according to data compiled by Bloomberg.

 “There is a global outflow from emerging markets — Russia isn’t an exception from the trend, but recently its market was supported by higher oil prices,” said Vadim Bit-Avragim, a money manager at Kapital Asset Management LLC in Moscow. “Now the factor of high crude price is diminishing.”

With American and British markets closed Monday crude futures markets were still open and the moves became much larger with little liquidity. Oil futures continued to sell off. Brent fell from $80.49 a barrel last week, the highest since 2014, to $75.24 a barrel on Monday, the lowest since May 8, WTI has fallen from near $72.80 to 66.20 in the same few days.

The Russian ruble was also hit,  falling 1.8 percent against the U.S. dollar since May 22. That puts it in the second-worst performance globally, in the company of Argrntina’s peso and Turkey’s Lira that gives you an indea of the oil effect. 

Moving forward it will be interesting where Russia and Saudi statements go. Clearly one of the concerns is US shale production, last week Baker Hughes reported U.S. oil rigs were unchanged, thought they rose 11 in the Permian, US oil production was also unchanged, all be it at record highs.

Oil is one of the most politically affected commodities out there, what are the intentions of Russia and what are their intentions?

Source: TradersCommunity, Bloomberg

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