Individual investors bet on oil price recovery

With oil prices sinking, individual investors in South Korea are increasingly opting for investments linked to oil prices, according to the Korea Exchange on Wednesday.

The stock market operator noted that the combined value of 10 oil-linked exchange-traded funds and exchange-traded notes that individuals bought last month jumped more than ninefold from the previous month to reach 1.42 trillion won ($1.16 billion).

Kodex WTI Crude Oil Futures ETFs, in particular, attracted 421.4 billion won from individuals, nearly 23 times the figure seen the previous month. Samsung Securities Leverage WTI Crude Oil Futures ETNs drew 184.9 billion won, nearly 18 times what they had in the preceding month.

An ETF is a financial investment vehicle that tracks underlying assets such as stocks, bonds, commodities and futures contracts, and an ETN is an unsecured debt note issued by a financial institution.

Since Russia and Saudi Arabia, two of the largest oil producers, have butted heads over market share since earlier this year, oil prices have dipped to record low levels in years.

The members of OPEC and their allied oil producers are scheduled to meet Thursday to discuss output cuts.

Market analysts forecast that volatility in the global oil market will linger until the OPEC members meet in the middle regarding output cuts.

“US President Donald Trump’s intervention to stabilize oil prices has maintained oil prices above $20 per barrel, but the prices will continue to fluctuate until the OPEC nations come to an agreement,” said Hwang Byeong-jin, an analyst from NH Securities & Investment.

West Texas Intermediate, the US benchmark, jumped 6.18 percent to $25.09 in intraday trading Wednesday.

By Kim Young-won (wone0102@heraldcorp.com)