Multiple oil funds issue new temporary suspension notices! The highest increase in March was 77%

The surge of crude oil LOF in March has become the focus of the entire market. From a monthly performance perspective, the oil and gas funds have shown astonishing growth, with a peak increase of 77%. With the overall premium rate of crude oil LOF funds constantly rising, fund companies have frequently issued announcements to warn about trading risks.

On March 26, several companies announced temporary suspensions, declaring a halt to trading just one hour after the market opened that morning. That evening, multiple companies successively announced that to protect investors’ interests, they would suspend trading from the market opening on March 27 until 10:30 AM that day, while also warning about the premium risk of trading prices in the secondary market.

Oil and Gas Funds Show Incredible Gains in March

On March 26, several oil funds collectively announced continued suspensions.

At noon on the 26th, Southern Fund’s Southern Crude Oil LOF (501018), Harvest Crude Oil LOF (160723), and Crude Oil LOF from E Fund (161129) released temporary announcements indicating that due to the premium in the secondary market trading price on March 26 not falling back, a temporary suspension would be implemented from the afternoon market opening until market close.

That evening, E Fund’s Crude Oil LOF (161129), Harvest Crude Oil LOF (160723), and Huachuang Fund’s oil fund LOF (160416) successively announced that to protect investors’ interests, they would suspend trading from the market opening on March 27 until 10:30 AM that day, while also warning about the premium risk of trading prices in the secondary market.

According to Wind’s statistical data, this year, the oil sector has performed exceptionally well among all LOF funds. As of March 26,

7 out of the top ten LOF funds ranked by year-to-date returns are oil funds.

As of March 26, Southern Crude Oil LOF (501018) ranks first with a year-to-date increase of 54.99%, while the increases for Harvest Crude Oil LOF (160723) and E Fund’s Crude Oil LOF (161129) also exceed 50%. The returns for the remaining four oil LOF funds are all above 26%, leading the entire market.

From a monthly performance perspective, the oil and gas funds have shown incredible gains. As of March 25, Harvest Crude Oil LOF increased by 77.37% within the month, while E Fund’s Crude Oil LOF and Southern Crude Oil LOF recorded monthly increases of 66.28% and 59.97%, respectively. The return of the Fidelity S&P Oil and Gas ETF also reached 42.58%.

High Premiums Prompt Frequent Risk Warnings from Fund Companies

Due to the ongoing tense geopolitical situation in the Middle East, fluctuations in the international crude oil market have significantly intensified, leading to a sustained premium trend in domestic oil and gas thematic funds.

Wind data shows that as of the market close on March 26, E Fund’s Crude Oil LOF (161129) had a premium rate of 48.69%, Harvest Crude Oil LOF (160723) was at 42.54%, and Southern Crude Oil LOF (501018) was at 41%. In terms of ETFs, the Fidelity S&P Oil and Gas ETF had a premium rate of 27.28%, ranking first among all ETFs in the market.

The high premiums of this round of oil and gas funds are primarily driven by the ongoing escalation of the Middle Eastern situation. Before the outbreak of the Middle East conflict, on February 27, the price of Brent crude oil was only $70.42 per barrel. Entering March, oil prices surged continuously, and on March 9, they skyrocketed to a historic high of $114.94 per barrel, an increase of 63%. Afterward, prices showed volatility, slightly retreating in recent days, closing at $98.06 per barrel on March 25, and returning to around $100 per barrel on March 26.

For investors currently looking to chase high prices by buying these crude oil LOFs, the biggest risk they face is not just the volatility of international oil prices, but also the risk of high premium rates in the secondary market. The aforementioned crude oil LOF fund companies, such as E Fund, Southern Fund, Harvest Fund, Huachuang Fund, and GF Fund, have issued risk warnings for several weeks, as many crude oil LOF trading prices in the secondary market are significantly higher than the net asset value of the fund shares, resulting in substantial premiums. Investors are hereby reminded to pay attention to the premium risk of trading prices in the secondary market. Blindly investing in fund shares with high premium rates may lead to significant losses.

Guotai Fund believes that although international oil prices have recently retreated from earlier highs, they still exhibit high volatility. Current oil prices are primarily trading around the U.S.-Iran conflict. On one hand, the shift of conflict in the Middle East to energy facilities has intensified market concerns about oil supply; on the other hand, the U.S. is managing market expectations by temporarily lifting sanctions on Russian and Iranian oil and signaling negotiations with Iran, which has a certain suppressive effect on oil prices.

Regarding the future market, Guotai Fund points out that the high volatility of oil is expected to continue. The current geopolitical situation is highly uncertain, making oil and gas funds susceptible to significant fluctuations due to international conditions. Investors should remain rational, exercise caution when chasing high prices, and implement effective risk control.

(Reviewer: Li Yue)

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