ETF investors face highest risk as oil volatility batters energy funds

Crude futures seesaw between negative territory and recovery

Extreme volatility seen in oil price movements over the past week, as the coronavirus pandemic continues to severely hamper demand for the commodity, could lead to emergency measures for hard hit energy funds, but mass flows into oil ETFs may leave passive investors exposed to much greater risks.

WTI Crude futures dipped as far as $30 into negative territory for the first time in history early last week, largely due to reduced demand for the May contract and limited purchaser storing space, which was then followed by heavy falls in Brent Crude futures. Prices recovered slightly later in the week, at least in part owing to renewed tensions between the White House and Iran, with Brent and WTI Crude futures trading at $21.80 and $15 per barrel (bl) respectively at time of publication. The volatility has led to heavy losses across energy funds, which had already struggled amid his...