United States Oil Fund LP (ETF)(USO): Oil ETFs See Biggest Outflows In 15 Months

The record US oil inventory builds seen over the last few weeks support this view, with US Gulf Cost (PADD 3) stocks now at 220 mil bbl, the highest level on record. Furthermore, we expect inventory builds to both continue over 2015H1 and to spread globally (OECD ex. US inventories have been drawing recently), as China’s oil import demand remains weak…

And on home gamers’ “misunderstanding” of how the world actually works…

Apart from the obvious disconnect between recent price trends and physical fundamentals, the rationale of going long oil on an expected normalization or “mean reversion” also suffers from an incomplete view of how commodity returns are generated. Commodity returns incorporate both price returns and roll yields. And with roll yields currently around –9% for oil (–2.4% for the overall S&P GSCI), any upside to price returns is being significantly eroded by losses on roll yields. We expect this situation to continue for at least the next 6 months, with the roll yield on the S&P GSCI continuing to weigh on total returns. 

Thus, dramatic outflows from the major Oil ETFs will put further pressure on Oil futures prices.

This article is brought to you courtesy of Tyler Durden From Zero Hedge.

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