Oil funds lose big on plunging crude prices

November 15, 2018

SEOUL, Nov. 16 (Yonhap) — South Korea’s three oil commodity exchange traded funds (ETFs) have chalked up abysmal returns over the past month due to tumbling crude prices, a fund evaluator said Friday.

The oil-focused funds, which are pegged to crude prices, posted an average return of over minus 15 percent in the month to Friday, according to market tracker KG Zeroin.

Oil ETFs consist of either crude firm stocks or futures and derivative contracts to track the price and performance of oil, or in some cases oil-related indexes.

The oil ETFs far underperformed other commodity-type funds and the local stock market. Non-oil commodity ETFs registered a median yield of minus 2.41 percent over the cited period, with the benchmark Korea Composite Stock Price Index (KOSPI) losing 4.2 percent.

International oil prices have been on the skids over the past month due to a suite of negative factors, including a U.S. decision to delay imposing sanctions on Iran.

Brent crude has nose-dived 22 percent during the period, with West Texas Intermediate (WTI) sinking 19 percent and hovering below US$60 per barrel.

In particular, WTI plummeted more than 7 percent on the New York Mercantile Exchange on Tuesday, the biggest one-day drop in more than three years.

Other negative factors include the recent downgrade of its outlook for global oil demand and an unexpected upgrade of supply by the Organization of Petroleum Exporting Countries (OPEC), a rise in U.S. stockpiles and U.S. President Donald Trump’s pressure on rising crude prices.

Analysts predict the crude market’s increased volatility to last for the t