Codex WTI Futures June Individual Investors Net Selling Ranked No.1
International Oil Prices Recovering... Rebound to Early COVID-19 Levels
Oil Prices Expected to Remain Sideways for Now... Difficult to Gain Capital Gains
[Asia Economy Reporter Minwoo Lee] Individual investors are withdrawing from oil-related futures products. As international oil prices, which had plunged into negative territory due to a sharp drop in demand amid the COVID-19 pandemic-induced economic slowdown, began to normalize with the resumption of economic activities in various countries, investors appear to have concluded that there is no longer any profit to be made.
According to the Korea Exchange on the 2nd, individual investors net sold 24.9 billion KRW worth of 'KODEX WTI Oil Futures (H)', an exchange-traded fund (ETF) tracking West Texas Intermediate (WTI) crude oil futures prices, the previous day. Among all stocks on the KOSPI and KOSDAQ markets, only SK Telecom (66.4 billion KRW) and Samsung SDI (29.6 billion KRW) had larger net sell volumes. In the previous month, it was the most sold stock by individual investors across all stocks. It surpassed Samsung Electronics (50.34 billion KRW), ranked second with net sales of 51.55 billion KRW, and KODEX Leverage (49.89 billion KRW), ranked third. Since recording an all-time high net purchase of 1.2763 trillion KRW by individual investors in April, there has been a steady outflow, including a net sale of 260.5 billion KRW in May.
This is interpreted as a judgment that it is no longer possible to expect capital gains from rising oil prices as international oil prices have recovered to pre-COVID-19 levels. On the 1st (local time), August delivery WTI closed at $39.82, up 1.4% ($0.55) from the previous day on the New York Mercantile Exchange (NYMEX). International oil prices, which were in the $60 range at the beginning of the year, began to plunge as the COVID-19 crisis unfolded. On April 20th, prices fell to -$37.63, marking the first-ever negative oil price. Since then, prices have steadily risen, closing at $40.46 on May 22nd, recovering to $40 in just two months. Since then, prices have hovered around $40, maintaining levels close to early March before the COVID-19 pandemic.
Analysts attribute the rise in oil prices to news of declining U.S. crude oil inventories. According to the U.S. Energy Information Administration (EIA), U.S. crude oil inventories, which had recorded record highs for three consecutive weeks, decreased by 7.2 million barrels last week. This was a larger drop than the market expectation of 710,000 barrels. The slight increase in China's June Manufacturing Purchasing Managers' Index (PMI), indicating four consecutive months of economic expansion, is also seen as a positive factor.
As oil prices are expected to remain sideways for the time being, enthusiasm for investing in oil futures-related products is expected to further wane. Kwangrae Park, Senior Researcher at Shinhan Investment Corp., said, "Global oil demand has escaped the worst situation, but due to the prolonged COVID-19 pandemic, a full recovery to previous levels is unlikely. The direction of oil prices will be determined by future supply factors, but prices are expected to remain in the mid-$30 to $40 range until the end of the year."
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