There has been a large money inflow into oil ETPs. However, Barclays says, returns from passive investments in ETPs can be limited by negative roll yield.Since the November 2014 OPEC meeting, there has been a nearly $2.5bn inflow into the four biggest oil exchange traded funds. This inflow is significant as the total AUM of those four funds was only$2bn before the OPEC meeting.

The recent oil price drop has attracted many investors to oil, with expectations of a price rebound. This is the first time that investors have shown strong demand for a commodity other than gold, after two years of heavy outflow of commodities investment. The clearest sign of this investor demand comes from ETP holdings.

For the four biggest oil ETPs, there was $1.24bn of inflow in December 2014, the largest since May 2010. So far in January 2015, inflow already stands at $1.26bn, according to Barclays.

This investor demand targets oil specifically. Money inflow into other commodities, such as precious metals and agriculture products, has been much more subdued. In addition, there are several issuances of structure notes designed specifically to profit from an oil price recovery, which is more evidence of investors’ appetite for oil. Notes issued were either linked to oil indices or energy equities.

As an example, in the past three months, there were issuances of more than $50mn worth of notes linked to the S&P GSCI Crude Oil Excess Return Index. Previously, this index was used as the underlying for only five transactions.
Source: Barclays