Investors Pile Into Oil Funds at Fastest Rate Since 2012

Investors are pouring money into funds that track crude prices at the fastest rate since June 2012, in anticipation that oil will rebound from a bear market.

The four biggest oil exchange-traded products listed in the U.S. received a combined $616.5 million this month through yesterday, the most in more than two years, according to data compiled by Bloomberg. That follows inflows of $431 million last month.

Investors are piling into oil ETFs even after crude prices tumbled into a bear market. The four biggest U.S. funds tied to oil had 83.2 million shares outstanding yesterday, the most since February 2013, according to exchange data compiled by Bloomberg. West Texas Intermediate, the U.S. crude benchmark, slumped 28 percent from this year’s high in June as soaring global output and a slowdown in demand growth created a glut.

“What we are seeing here is people betting on a return to normal,” said Dave Nadig, chief investment officer of San Francisco-based ETF.com, an ETF analysis firm. “There are a lot of investors that have a belief of a natural price for oil, and that natural price is substantially above the current level.”

The United States Oil Fund, the biggest U.S. oil ETF, gained 0.8 percent to $28.97. The fund’s assets grew to $1.07 billion yesterday, the most since Jan. 13. It broke above $1 billion on Nov. 18 for the first time since January.

WTI futures gained 0.8 percent to $76.49 a barrel as of 10:33 a.m. on the New York Mercantile Exchange today. The futures settled at $74.21 on Nov. 13, a four-year low.

Short Interest

The number of U.S. Oil Fund shares on loan to short sellers was below 3 million yesterday, down from near 8 million last month, data compiled by Markit and Bloomberg show.

The CBOE Crude Oil Volatility Index, which measures oil price fluctuations using options of the U.S. Oil Fund, climbed to 37.23 on Oct. 14, the highest since July 2012, from a record low of 14.50 in June. The gauge was 33.6 today.

The Organization of Petroleum Exporting Countries produced 30.97 million barrels a day in October, exceeding its collective output target of 30 million barrels a day for a fifth straight month, data compiled by Bloomberg show.

U.S. crude production will rise to 8.57 million barrels a day this year, the Energy Information Administration estimated. That would be the highest level since 1986. Output will climb to 9.42 million next year, the EIA said.

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