Exchange-traded oil funds fell on Friday as the European Union announced a cap on Russian oil prices.
The ProShares Ultra Bloomberg Natural Gas (BOIL) and the United States Natural Gas Fund LP (UNG) were down 13% and 6.6% respectively during midday trading. Two of the largest energy-focused ETFs, the Selected Energy Sector SPDR Fund (XLE) and the iShares US Oil & Gas Exploration & Production ETF (IEO)both fell nearly 1%.
Meanwhile, the actions of the ProShares UltraShort Bloomberg Natural Gas (KOLD)which offers twice the inverse exposure to the performance of a natural gas futures contract for one day, jumped as much as 14%.
Despite the strong market reaction on Friday, some experts noted that the price cap may have minimal impact on the oil market in the coming days.
“The $60 cap is unlikely to have any effect on the oil market unless something happens to stop or slow the physical flows of Russian oil,” ETF chief Peter McNally told the ETF. global industrials, materials and energy sector at Third Bridge. .com, noting that Russian crude oil discounts have already been in place for a few months.
“If for some reason Russia decides to hold market barrels, then the chances of a price spike increase, because there just aren’t a lot of crude stocks by historical standards,” he added.
The sector’s moves come after the European Union agreed to put a $60-a-barrel cap on Russian oil after nearly a week of tough negotiations. While the price per barrel is higher than the current price of Russian crude oil, it is lower than the current price in Asia. The $60 is also lower than a previous proposal of $65, a downgrade put into effect following pressure from Poland and other Eastern European countries.
According to an EU document containing details of the cap, the price limit will be reviewed regularly to analyze the effects on the market, but would remain “at least 5% below the average market price”.
“I welcome the EU’s agreement on setting a price cap on Russian oil,” Estonian Prime Minister Kaja Kallas said. in a tweet Friday. “Criminalizing Russia’s energy revenues is at the heart of shutting down the Russian war machine.”
Brent Crude, a global benchmark for Atlantic Basin crude oil prices, slid 1.8% on the news.
Contact Shubham Sahara at [email protected]
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