A cohort of oil traders has made a major leveraged bet that oil prices will decline from highs reached during the US-Iran war. According to reports from CNBC TV18, the ProShares UltraShort Bloomberg Crude Oil ETF received inflows worth $977 million in March, marking the largest monthly inflow since the fund's inception in 2008. The ETF is designed to deliver twice the inverse of daily crude price moves, meaning returns are twice the quantum of oil price falls when prices decline.
After US President Donald Trump signaled a potential end to the Iran war on Tuesday, the fund saw a rally of 8%, as reported by CNBC TV18. However, the fund still ended March down by 41% as most short positions were caught on the wrong side with Brent registering a record monthly advance due to the Iran war. Despite the flurry of optimism over potential de-escalation, attacks continued this week with an oil tanker hit near Qatar causing a fire that was eventually doused.
Despite the bearish sentiment, bullish funds also attracted record investment flows. According to CNBC TV18, the United States Oil Fund (USO) attracted flows worth nearly $700 million in March, the most since the pandemic. The United States Brent Oil Fund (BNO) saw flows worth a record $600 million during the same period. As reported by Todd Sohn, chief ETF strategist at Strategas Securities, flows into SCO reflect a mix of directional bets on oil price reversal alongside hedging and arbitrage activity.
