Exchange-traded notes (ETNs) based on crude oil are among the lowest in revenue performance this year. Considering that international oil prices typically rebound during the summer due to supply and demand factors, individual investors have recently started buying, but forecasts suggest this year may be different.
According to the Korea Exchange on the 28th, the Samsung leveraged WTI crude oil futures ETN, which tracks the daily rise and fall rate of West Texas Intermediate (WTI) crude oil prices twice, traded at 1,066 won as of 1:30 p.m. on that day in the KOSPI market. This is a decline of 29.8% (452 won) compared to the beginning of the year. It is experiencing the dual challenges of falling international oil prices and a decrease in the won-to-dollar exchange rate.
The Shinhan leveraged WTI crude oil futures ETN (H) and Mirae Asset leveraged crude oil futures mixed ETN (H), which hedge against currency risk, have also fallen around 25% as of this day this year. The Shinhan WTI crude oil futures ETN (H), which directly reflects WTI prices, has decreased by 10.8% during the same period. This is due to WTI prices dropping from $80 per barrel in January to around $60 now.
However, individual investors have been net buying these products again since mid-month. This is likely due to the approach of the 'driving season' in the United States, the world's largest oil consumer, and the hurricane season.
First, the driving season refers to the period from Memorial Day (the last Monday in May) to Labor Day (the first Monday in September). During this time, Americans increase oil consumption as they embark on road trips and outdoor activities. Over the past decade, both monthly vehicle mileage and gasoline consumption in the U.S. peaked during the months of May to August. Given that gasoline used by automobiles in the U.S. accounts for about 10% of global crude oil demand, this could be a factor affecting international oil prices.
Additionally, from June to November is when hurricanes typically occur in the Gulf of Mexico (U.S. Gulf). The Gulf of Mexico coast in the southern United States is home to a concentration of crude oil production and refining facilities, which can halt operations if affected by hurricanes. This means that while demand may increase, supply could decrease.
The problem is that economic slowdown in the United States may lead to less travel demand than in previous years. There are also projections suggesting the frequency of hurricanes may decrease as La Niña (a phenomenon characterized by cooler sea surface temperatures in the eastern Pacific) comes to an end.
Most importantly, the possibility of the Organization of the Petroleum Exporting Countries (OPEC) and its alliance of major oil-producing countries, OPEC+, increasing supply is putting pressure on international oil prices. The eight OPEC+ member countries that initiated voluntary additional production cuts are scheduled to hold a video conference on the 31st, with expectations that they may confirm an increase of 410,000 barrels per day. OPEC+ had previously decided to gradually increase production by 138,000 barrels per day since April and has now increased that to 410,000 barrels per day this month.
Choi Ye-chan, a researcher at Sangsangin Investment & Securities, noted that "due to concerns over economic slowdown caused by tariffs and the possibility of increased supply from OPEC+, international oil prices are under pressure." He added that "while the driving and hurricane seasons may lead to short-term supply disruptions and subsequent price rebounds, it will likely be insufficient to change the downward trend."