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Wall St. Jl. Energy ReportThe Wall Street Journal Energy Journal Money Pours Out of Oil ETFs By Christopher Harder Here’s your morning jolt of news, insight and analysis on the global energy business. Send us tips, suggestions and complaints: EnergyJournal@wsj.com Sign up for this newsletter: http://on.wsj.com/EnergyJournalSignup OIL-FUND OUTFLOWS BODE ILL FOR PRICES Exchange-traded funds, or ETFs, that invest in U.S. oil futures are showing signs of outflows in a negative signal for a monthlong crude-price rally, Nicole Friedman reports. An inflow that began in January, as oil prices continued to fall, totaled roughly $6 billion through mid-March, when U.S. crude hit a six-year low, according to Macquarie Group Ltd. But the ETFs, which can be bought and sold like stocks and include the $3.1 billion United States Oil Fund LP, have registered about $2.7 billion of investor outflows in April. Traders and analysts say crude prices are vulnerable to a pullback following a 32% run-up since March 17. Also, many ETFs will sell futures contracts near their expiration and buy later-dated contracts, which currently are more expensive than front-month contracts. “If I think prices are going to go up 20% in the next two years, given the current shape of the curve, half of that will be eroded” by continuously holding the front-month contract, said Nick Koutsoftas, co-portfolio manager for commodities strategy at Cohen & Steers. RAILWAY-CAR DEMAND FALLS Lower oil prices and falling shale-oil production have cut demand for key types of railroad cars, Bob Tita reports. Buyers ordered 4,470 new railway tank cars during the quarter ended March 31, down 6% from a year earlier and about 70% from the 14,964 tank cars ordered during the fourth quarter, according to the Railway Supply Institute, a Washington-based trade group. Orders for covered “hopper” cars, used mostly to deliver fracking sand to drill sites, also fell in the first quarter to 131 cars, from 11,565 a year earlier and 8,627 cars during the fourth quarter. New rules to make tank cars that haul flammable liquids safer during derailments are expected to stimulate the car market. U.K. WOULD OPPOSE FOREIGN TAKEOVER OF BP The U.K. government told BP PLC that it would oppose any potential foreign takeover of the company because it wants the oil giant to remain a British company with global clout, Jenny Gross and Justin Scheck report. BP would be a huge takeover target, considering its market capitalization of more than $132 billion. But speculation has swirled over possible deal-making due to low oil prices. Royal Dutch Shell PLC recently reached a deal to buy U.K.-based BG Group PLC for about $70 billion, which will test Shell’s ability to absorb a huge company. Shell successfully pushed to undermine European Union targets for renewable energy, the Guardian reports. MARKETS Crude-oil futures were lower in European trade on Monday as investors weighed supply-demand fundamentals amid weakening confidence in the latest price rally. On the New York Mercantile Exchange, light, sweet crude futures for delivery in June traded at $56.77 a barrel at 1004 GMT, down $0.4. June Brent crude on London’s ICE Futures exchange fell $0.4 to $64.88 a barrel. Nymex West Texas Intermediate crude lost a marginal 0.3% last week, snapping a five-week winning streak, while Brent crude gained 2.9% last week and has been up for three consecutive weeks, rising by 18.8%. Read our latest market report at wsj.com. |
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