At the market close on February 2nd, all four crude oil LOFs managed by E Fund Management Co., Ltd., Harvest Fund Management Co., Ltd., Hua An Fund Management Co., Ltd., and GF Fund Management Co., Ltd. hit their daily downward limit. Notably, today marked the resumption of trading for Hua An Fund's Petroleum Fund LOF and GF Fund's Petroleum LOF. The Petroleum Fund LOF experienced a sharp decline immediately after resuming trade, followed by a minor rebound before ultimately falling by the daily limit; the Petroleum LOF plunged directly to its limit upon resuming trade at 10:30 AM.
Just the previous evening, the four fund management companies had issued announcements highlighting significant premium risks in the secondary market trading prices of these crude oil-themed funds. All four companies explicitly warned in their risk alerts that "investors are advised to pay attention to the premium risk in secondary market trading prices, as purchasing at high premiums may lead to substantial losses."
In fact, today's trading halt for Hua An's Petroleum Fund LOF and GF's Petroleum LOF was already their second suspension. These four products had previously been suspended from trading on January 30th. At that time, except for GF Fund's Petroleum LOF, the other three products experienced substantial volatility after resuming trade. Concurrently, to ensure stable fund operation, all four products had previously issued announcements restricting subscriptions and redemptions.
From an investment strategy perspective, E Fund's Crude Oil LOF and Harvest's Crude Oil LOF are international (QDII) macro-strategy funds, with holdings primarily in oil funds; Hua An's Petroleum Fund LOF and GF's Petroleum LOF are international (QDII) passive index equity funds, holding oil stocks. It is noteworthy that, similar to the SDIC Silver LOF, crude oil LOFs have recently become prime targets for arbitrage capital. Even after today's limit-down, Hua An's Petroleum Fund LOF and GF's Petroleum LOF still maintained premiums of 19.53% and 19.29%, respectively.
Turning to the futures market, during the Asian trading session on February 2nd, Brent crude futures briefly fell below $67 per barrel, while WTI crude futures dropped below the $63 mark, both recording intraday declines exceeding 3%.
Industry insiders suggest that the primary driver behind the oil price volatility is a sudden shift in geopolitical expectations. Just days ago, market concerns about a potential US military strike on Iran had pushed Brent crude to a six-month high, with WTI crude nearing its highest level since late September last year. However, the situation changed over the weekend. US President Donald Trump told reporters that Iran was engaged in "serious negotiations" with Washington. Subsequently, Iran's top security official, Ali Larijani, indicated on social media that arrangements for talks were underway.
The prevailing uncertainty in the international landscape has injected a risk premium into oil prices. Yet, any signs of easing tensions can cause this premium to evaporate rapidly.
Beyond geopolitical factors, the crude oil market faces multiple pressures. Regarding the global oil demand outlook, the International Energy Agency (IEA) anticipates an oversupplied international oil market in the current year, with supply exceeding demand by as much as 3.85 million barrels per day.
Looking ahead, analysts believe market volatility may persist in the short term. Everbright Futures stated that close attention must be paid to risk resonance, noting that the biggest variable on the supply side is whether the US-Iran conflict remains contained or escalates. Under a contained scenario, the supply-demand balance sheet remains loose, suggesting most geopolitical premium is already priced in. In an escalation scenario, however, oil prices would still possess significant upside potential.
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