Oil prices have fluctuated as OPEC (Organization of the Petroleum Exporting Countries) has recently announced plans to cut crude oil production. While the price of crude oil is skyrocketing every day, the ETF (Exchange Exchange Fund) and ETN (Exchange Exchange Securities) that follow it are also on the rise.
According to the Korea Exchange on the 6th, the ETF that topped the fluctuation rate as of the 5th of this month is Samsung Asset Management’s KODEX WTI Crude Oil Futures (H) ETF (9.02%). It was followed by ▲TIGER Crude Oil Futures Enhanced (H) ETF (8.94%) ▲KBSTAR US S&P Crude Oil Production Company (Synthetic H)’ ETF (7.65%).
The fluctuation rate of crude oil ETN is steeper. During the same period, Samsung Bloomberg leveraged crude oil futures ETN rose by 20.32% ▲Shinhan Bloomberg leveraged WTI crude oil futures ETN (20.29%) ▲TRUE Bloomberg leveraged WTI crude oil futures ETN (20.26%) ▲Hana S&P leveraged WTI crude oil futures ETN (20.06%) ▲ Samsung leveraged WTI crude oil futures ETN (19.92%) also surged all at once.
Crude oil-related products are soaring every day because major oil-producing countries, including OPEC and OPEC+, a consultative group of non-member oil-producing countries, are raising oil prices as they come up with additional production cut plans without prior notice.
On the 2nd (local time), major oil producing countries such as Saudi Arabia, the United Arab Emirates (UAE), and Iraq announced that they would cut production from next month to the end of this year. This additional production cut is separate from the 2 million barrels per day cut decided at the OPEC+ meeting in October last year. In the end, OPEC+’s total production cuts amount to about 3.66 million barrels per day, which is equivalent to 3.7% of global crude oil demand. If this production cut actually takes place, it is observed that OPEC crude oil production could fall below 28 million barrels per day for the first time since the end of 2021.
Specifically, Saudi Arabia announced that it would voluntarily reduce domestic crude oil production by 500,000 barrels per day from May to the end of this year. In addition, the United Arab Emirates (UAE), Kuwait, Iraq, Oman and Algeria have also come up with plans to reduce their own crude oil production one after another.
In the stock market, if this production cut becomes a reality, it is expected that the price of crude oil will continue to rise for the time being, as well as the yield of ETF and ETN products will rise. This is because the scale of voluntary additional production cuts is not insignificant, and the shock of a decrease in crude oil supply is inevitable as Russia’s crude oil production has also decreased since the war between Russia and Ukraine.
Park Sang-hyun, a researcher at HI Investment & Securities, said, “As the reopening effect in China is expected to start in earnest with the ‘driving season’, the peak demand for gasoline in the summer in the US, we cannot rule out the possibility that supply and demand instability in the crude oil market will increase.” Considering that it has already released a significant amount of strategic oil reserves, it seems that there will be limits to stabilizing oil prices through the release of additional strategic oil reserves.”
Researcher Park added, “Since it is unlikely that the US will respond to OPEC+’s production cuts by increasing production, short-term oil prices will inevitably continue to rise.”
