BlackRock Energy ETF Sends Big Investor Fleeing as Oil Slumps

(Bloomberg) -- With oil hovering just above its lowest level since August 2017, at least one large investor is dumping a BlackRock Inc. exchange-traded fund tracking the global energy industry.

Two large blocks of the $1.4 billion iShares Global Energy ETF, or IXC, sold on Wednesday. The first was 1.1 million shares worth $34 million at 10:37 a.m. in New York, and the second trade was just shy of 2 million shares worth $60 million about eight minutes later. The activity pushed IXC’s turnover for the day to $144 million, the most this month and about 10 times the daily average for the past year.

IXC is hardly alone. Investors have yanked more than $1 billion from all U.S.-listed energy ETFs, putting 2018 on track to be the first year of outflows ever for the industry. Energy is the biggest decliner among all groups in the S&P 500 Index this year, plunging almost 20 percent.

The price of oil has tumbled recently amid economic jitters, a sell-off in global equities and surging output in nations outside of OPEC. U.S. inventories, for example, have grown, adding to concerns about a potential glut. West Texas Intermediate crude settled at its lowest price since August 2017 on Tuesday.

OPEC and its allies agreed this month to cut 1.2 million barrels in daily production in an attempt to revive prices. On Wednesday, Saudi Arabia predicted that OPEC will extend supply cuts in 2019.

“There’s a lot of uncertainty around global growth,” Jay Pelosky, chief investment officer at TPW Investment Management, said on Bloomberg TV. “And if we are slowing down globally and production is increasing, then obviously you don’t want to be in oil.”

Shares of IXC are down about 11 percent this month, which is in line with the decline of Exxon Mobil Corp., its biggest holding. Chevron Corp., its second-largest position, has dropped around 9 percent in December.

The $1.9 billion SPDR S&P Oil & Gas Exploration & Production ETF, or XOP, which holds a number of positions across energy producers like Cabot Oil & Gas Corp., as well as Exxon and Chevron, is down 37 percent in the fourth quarter, putting it on track for the worst quarterly decline since launching in 2006.

“Behavior of oil prices the past six weeks has been extraordinary,” Nathan Sheets, chief economist at PGIM Fixed Income, said on Bloomberg TV. “The first leg down was the geopolitical story about sanctions, and exemptions from the White House, and increased pumping by the Saudis. But the second leg down is uncertainty about global growth and about whether the demand is going to be there going forward.”

©2018 Bloomberg L.P.