International Oil Prices Stage "Roller Coaster" Performance, Oil and Gas Themed Funds' High Premium Plummets Sharply

(Source: Economic Information Daily)

Affected by the Middle East situation, international oil prices experienced a rollercoaster on March 9, with sharp rises and falls. On March 7, Barclays predicted that if the conflict in the Middle East continued for a few more weeks, Brent crude oil prices could test $120 per barrel. At 10:34 AM Beijing time on March 9, Brent crude futures (B00Y) surged to $119.48, approaching the $120 mark, as Barclays’ forecast quickly materialized due to market sentiment.

However, the rapid increase did not last, and subsequent news about the Middle East triggered a sharp decline. On March 9, Brent crude futures (B00Y) settled at $98.96, with an intraday low of $83.66, experiencing significant volatility during the day.

On March 10, Brent crude futures (B00Y) opened at $92.49, continued to decline during the day, reaching as low as $81.16, and closed at $87.80. On March 11, it opened at $90.40, and by 11:30 AM Beijing time, it was quoted at $87.82, with prices fluctuating throughout the day and touching a low of $86.72.

As international oil prices surged and then plummeted, the oil and gas sector in the A-share market also experienced significant volatility. On March 9, despite opening higher, the China Securities Oil & Gas Industry Index, China Securities Oil & Gas Resources Index, and China Securities Petroleum & Natural Gas Index all fluctuated downward during the day. By the close, the Oil & Gas Industry Index and Oil & Gas Resources Index fell by 0.66% and 0.29%, respectively, while the China Securities Petroleum & Natural Gas Index rose by 0.84%. Oil and gas themed on-market funds showed mixed performance.

On March 10, these three indices opened lower and continued to decline, ending the day with substantial drops of 3.34%, 3.53%, and 3.91%, respectively. On-market funds also declined collectively, with some funds losing nearly 10% that day. On March 11, the indices continued to open lower and decline, closing at 11:30 AM with decreases of 1.49%, 1.63%, and 1.40%, respectively, with most oil and gas themed funds also falling.

Notably, since the turmoil in the Middle East began, on-market funds focused on oil and gas have shown significant premiums, frequently issuing risk warning notices and temporary suspension announcements to cool market speculation. According to Tonghuashun iFinD data, from March 1 to 10, a total of 10 oil and gas themed funds issued 62 premium risk warning notices, with some funds even suspending trading temporarily to alert investors.

Among funds issuing more than 10 risk warning notices in March, three stand out: the GF Pictet Petroleum & Natural Gas Exploration and Production Select Industry ETF (QDII) (“GF Pictet Oil & Gas ETF”), the Southern Oil Securities Investment Fund (“Southern Oil LOF”), and the Hu’an Pictet Global Oil Index Securities Investment Fund (LOF) (“Hu’an Oil Fund LOF”), which issued 15, 13, and 10 notices, respectively.

With the continuous decline of oil and gas indices and frequent premium risk warnings, how have the premium levels of oil and gas themed funds changed?

Currently, the premiums of GF Pictet Oil & Gas ETF, Southern Oil LOF, and Hu’an Oil Fund LOF have all decreased. For example, GF Pictet Oil & Gas ETF reached its highest premium on March 4, with a rate of 21.00%. It then declined to 19.00% on March 5 and 15.66% on March 6. On March 9, influenced by the surge in oil prices, the premium rebounded to 19.32%. After the sharp drop in oil prices on March 10, the premium narrowed significantly to 9.33%.