Sovereign wealth funds may withdraw $404.3 billion from global stock markets this year if crude prices stay between $30 to $40 per barrel as oil-rich nations seek to shore up their finances, according to the Sovereign Wealth Fund Institute.

The value of listed equities held by the world’s largest wealth funds will probably drop to $2.64 trillion this year, from about $3.04 trillion at the end of 2015, the Las Vegas-based SWFI said in an e-mailed report sent Monday. Withdrawals are set to approximately double from last year, when sovereign funds sold about $213.4 billion of equities, it said.

"The era of petrodollar-filled wheelbarrows being dumped into giant vats seems to be numbered," according to the Institute. "Commodity wealth funds have to be concerned about the state of their country’s finances, since many were created to either be stabilization funds, intergenerational savings vehicles or a combination thereof."

Sovereign funds from Qatar to the United Arab Emirates and Russia, which amassed about $7 trillion of assets as oil soared higher than $100 a barrel, are now liquidating investments after a more than 70 percent slump in crude since 2014. During the boom, oil countries led a surge in investments in the U.S. and Europe, buying stakes in iconic companies such as Barclays Plc as well as trophy assets including Manhattan hotels, European soccer clubs and London luxury homes.

David Fuller's view

Previously prosperous oil countries have some very significant sovereign wealth funds.  During accumulation these were investing in shares, bonds and trophy real estate.  Today, they are a source of supply for at least the lengthy medium term. 

Additionally, and quite separately, most companies have had to reduce their share buyback programmes.  This is because profits are lower and/or corporate bond yields are rising.  Fewer share buybacks may actually be good for these companies over the longer term, but currently they are a new headwind for stock markets. 

Meanwhile, the rally in response to a deeply oversold condition has made a good start to the week but short-term overbought conditions are developing.