Commodity Futures Varieties Surge Collectively, Some Profit-Taking Investors Choose to Exit

Securities Times Reporter Shen Ning

Affected by the Middle East situation, the international crude oil market has recently experienced volatile upward movements, triggering a collective surge in domestic energy and chemical futures. In this rally, a number of institutional and individual investors who followed the trend have gained substantial profits. However, the upward trend also faces uncertainties, and some investors have chosen to temporarily exit the market.

“We started buying crude oil at the end of January this year. When we saw the U.S. begin deploying aircraft carriers to the Middle East, we felt a potential geopolitical conflict might occur, which caused crude oil to lead the market,” said Shen Ran, founding partner of Hainan Jiayue, in an interview with Securities Times.

In addition to crude oil futures, Shen Ran’s fund also bought container shipping index (European line) futures at low levels, resulting in significant gains during this rally. However, after a sharp increase, he has partially reduced his positions at high levels to lock in most profits. He believes there is considerable uncertainty in the current market; the probability of the Strait of Hormuz being blocked for a long time is low and not in the interests of all parties, but short-term fluctuations are still possible.

On March 12, domestic energy and chemical futures showed strong performance, with several contracts hitting daily limit-ups. By the close in the afternoon, the main crude oil futures contract SC2604 rose by 11.26%, closing at 722.3 yuan per barrel; low-sulfur fuel oil, paraxylene, PTA, and bottle chips also rebounded strongly, with gains exceeding 10%.

A review of the domestic commodity market performance since March reveals that this round of energy and chemical commodities has risen at an astonishing pace. As of March 12, in just nine trading days, crude oil futures increased by a total of 49%, low-sulfur fuel oil futures surged by 64%, and many other energy and chemical products also gained over 30%. With about five times leverage, the margin returns for long positions in related commodities have exceeded 2 times.

According to industry sources, the explosion in prices of crude oil and other commodities has significantly driven some futures companies’ clients to open accounts, and some individual investors have also gained good returns through long positions in related products.

“Individual clients usually prefer to go long, which makes it easier for them to profit during upward markets. So, some of our personal clients have achieved very high returns. Additionally, recently, institutional investors engaged in asset allocation have mainly taken long positions in energy and chemical commodities, so most are also profitable. The main pressure comes from some industrial clients’ hedging positions, which are showing unrealized losses, and they also face margin calls,” said a relevant person from a futures company.

In fact, data from the futures trading competition also provides a relatively intuitive reflection of investors’ trading situations. The Securities Times reporter observed on the Champion Trader website that participants generally posted net profits in crude oil, fuel oil, and other commodities. The sharp market fluctuations on Tuesday once caused large single-day losses for some participants, but with recent market recovery over the past two trading days, their profits have been restored.

Shen Ran advises that investors without core holdings should not participate in crude oil-related trading at this time, as short-term unexpected volatility can occur at any moment. In the long term, the relatively loose global monetary environment will boost the valuation of strategic commodities. Therefore, he remains optimistic about gold and some non-ferrous metals.

(Edited by: Wen Jing)

Keywords: Futures