Crude Oil Fund Premium Remains Elevated! Multiple Products Halted Again Wednesday Morning for One Hour

On the evening of March 24, E Fund Oil LOF, Hu’an S&P Global Oil LOF, Harvest S&P Oil & Gas ETF, and Wanguo S&P Oil & Gas ETF all issued risk warning notices and suspension announcements. The notices state that, to protect investors’ interests, these products will be suspended from the market open on March 25 until 10:30 AM on the same day, and will resume trading after 10:30 AM on March 25.

Behind the frequent risk alerts from fund companies is the persistently high premium rate of crude oil funds.

According to Wind data compiled by The Paper, as of March 24, the premium rates of E Fund Oil LOF and Harvest Oil LOF reached 57.73% and 55.90%, respectively; South Oil LOF and Hu’an S&P Global Oil LOF had premium rates of 49.32% and 28.17%, respectively.

Meanwhile, in terms of daily price changes, both E Fund Oil LOF and Harvest Oil LOF increased by over 6% on Tuesday; over the past month, Harvest Oil LOF’s increase has reached 97.06%, while E Fund Oil LOF and South Oil LOF increased by 84.73% and 77.76%, respectively.

In fact, on the afternoon of March 24, the Shenzhen Stock Exchange announced that, due to the premium price in the secondary market not decreasing that day, and based on the application from the fund companies and relevant business rules, E Fund Oil LOF and Harvest Oil LOF were temporarily suspended from trading from the market open until the close.

E Fund and Harvest funds emphasized in their announcements that if investors blindly buy at a high premium significantly deviating from the actual asset value, they may face substantial investment losses when the secondary market price falls back. During the suspension, redemption services will continue as usual. The funds will take measures such as increasing the number of suspension times or extending suspension periods based on the premium rate situation, with specific details announced later.

It is worth noting that the exchange rarely chooses to suspend trading during midday hours. Earlier in early March, Hu’an S&P Global Oil LOF and South Oil LOF also experienced emergency suspensions due to high premiums during trading.

In the ETF market, premiums are also significant. As of the close on March 24, Wanguo S&P Oil & Gas ETF’s premium rate reached 28.75%, ranking first in the market; Harvest S&P Oil & Gas ETF’s premium rate was also high at 19.98%.

Analysts believe that the strong rise of oil and gas funds is mainly driven by ongoing geopolitical conflicts and concentrated capital inflows. However, the characteristics of high premiums, high volatility, and intense speculation in these on-market funds have become prominent. If geopolitical conflicts escalate further, oil prices may remain high; but if signs of easing appear or oil prices retreat, these products could face rapid correction.

“Due to supply and demand dynamics, secondary market trading prices often diverge from net asset values. When buying demand exceeds selling, prices may be higher than the real-time reference net value (IOPV), resulting in a premium. However, prices always fluctuate around value. Short-term supply-demand imbalances can push prices higher, but they will eventually revert to value,” industry insiders pointed out. Currently, crude oil prices are driven by capital, and once buying weakens or supply increases, the premium will narrow or even disappear. Those entering at high levels will bear losses, and the risk of premium correction is very high.

(Article source: The Paper)