Ants Buy Back Crude Oil ETFs and ETNs Again

Betting on Rise Following Market Stabilization

[Asia Economy Reporter Oh Ju-yeon] As international oil prices, which showed extreme volatility at the beginning of the year, have stabilized and are showing an upward trend again, individual investors are buying crude oil exchange-traded funds (ETFs) and exchange-traded notes (ETNs). Crude oil ETFs and ETNs earned the notorious nickname "ant graveyard" due to increased investment losses among individuals caused by the unprecedented "negative oil prices" incident and widening premium discounts in March. It is interpreted that individuals are betting on oil price increases, placing more weight on economic recovery rather than further declines caused by the novel coronavirus infection (COVID-19).

According to the Korea Exchange on the 7th, individual investors purchased 32.018 billion KRW worth of four types of crude oil ETFs and ETNs over five trading days from the 28th of last month to the 6th of this month. This amount is comparable to the net purchase volume of Samsung Electronics during the same period (32.115 billion KRW). By item, KODEX WTI Oil Futures (H) was the most purchased at 11.75 billion KRW, followed by Samsung Leverage WTI Oil (10.197 billion KRW), Shinhan Leverage WTI Oil (6.163 billion KRW), and Mirae Asset Leverage Oil (3.98 billion KRW).

Crude oil ETFs are products that caused massive investment losses to individuals due to the sharp drop in oil prices and widening premium discounts caused by COVID-19 at the beginning of the year, which even led to temporary suspension of trading. After the oil market stabilized, trading resumed, but prices remained significantly lower.

For the most purchased KODEX WTI Oil Futures (H), the price dropped from 20,000 KRW at the beginning of the year to 3,090 KRW at the end of April, and since June, it has fluctuated around 6,000 KRW. On the 5th, right after the Chuseok holiday, volatility increased due to U.S. President Donald Trump's COVID-19 diagnosis issue, causing the price to fall to the 5,000 KRW range. However, on the 6th, with Trump's early discharge and issues such as oil supply constraints, the price rose for two consecutive days, returning to the 6,100 KRW range. Samsung Leverage WTI Oil was in the 17,000 KRW range in early January but dropped to the 1,700 KRW range by the end of March, a tenth of its previous value. On the 9th of last month, it even fell to 295 KRW during trading, becoming a penny stock.

However, as expectations for economic recovery grow, individual investors are supporting an increase in oil prices rather than further declines. On the 5th, when Samsung Leverage WTI Oil's price plunged 11.43%, individuals net purchased 15.7 billion KRW worth in a single day. Compared to the previous day's purchase volume, which was only in the 100 million KRW range, this was a significant buying spree. Those who bought on that day are estimated to have earned a return of about 7%, with the price rising 4.84% on the 6th and 3.08% as of 10 a.m. that day.

International oil prices surged for two consecutive days, with West Texas Intermediate (WTI) crude oil futures for November delivery priced at 40.67 USD per barrel as of the 6th (local time). Although oil prices have been rising recently, concerns about the resurgence of COVID-19 and the possibility of delayed economic recovery remain, so the recovery of oil demand may be slow. Kim So-hyun, a researcher at Daishin Securities, said, "It will take at least 18 months for oil prices to recover to pre-COVID-19 levels," adding, "If Biden, who is favorable to renewable energy policies according to current public opinion, wins the U.S. presidential election, downward pressure on oil prices could increase further."

This content was produced with the assistance of AI translation services.