Oil ETFs plummet to the roof of Russian oil

Exchange-traded oil funds plummeted on Friday as the European Union announced a cap on the price of Russian oil.

The ProShares Ultra Bloomberg Natural Gas (BOILING) and the United States Natural Gas Fund LP (UNG) they lost 13% and 6.6% respectively during midday trading. Two of the largest energy-focused ETFs, the Energy Select Sector SPDR Fund (XLE) and the iShares US Oil & Gas Exploration & Production ETF (IEO)both are down nearly 1%.

Meanwhile, the shares of the ProShares UltraShort Bloomberg Natural Gas (KOLD)which provides double 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 limits could have little impact on the oil market in the days ahead.

“The $60 cap is unlikely to have an effect on the oil market unless something happens to halt or slow the physical flows of Russian oil,” Peter McNally, global head of industrials, materials, told the ETF. and Energy at Third Bridge. .com, noting that discounts on Russian crude have already been in place for the past few months.

“If, for some reason, Russia decides to withhold barrels from the market, then the chances of a price hike increase, as there simply isn’t much crude oil inventory by historical standards,” he added.

The industry’s moves come after the European Union agreed to put a $60-per-barrel cap on Russian oil after nearly a week of tough negotiations. Although the price per barrel is higher than the current Russian crude price, it is lower than the current price in Asia. The $60 is also lower than an earlier proposed $65, a downgrade implemented following pressure from Poland and other Eastern European nations.

According to an EU document detailing the cap, the price cap will be regularly reviewed 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 ceiling for Russian oil,” said Estonian Prime Minister Kaja Kallas, in a tweet on Fridays. “Crippling Russia’s energy revenues is at the heart of shutting down the Russian war machine.”

Brent Crude, a global benchmark price for Atlantic Basin crudes, slipped 1.8% on the news.

Contact Shubham Saharan to shubham.saharan@etf.com

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