Although international crude oil prices have shown no signs of rebounding for the third consecutive year, several securities firms are expected to relaunch crude oil exchange-traded notes (ETNs). Since crude oil ETNs are among the few products that can invest in fluctuations in international oil prices, the investment demand is high. This is why securities firms are preparing to launch crude oil ETNs despite the weak oil prices.
After the COVID-19 outbreak, crude oil leveraged ETNs experienced a total loss due to excessive speculative demand, and financial authorities suspended additional transaction trading, leading to significant challenges. At the time, securities firms benefited from the overheated investment in crude oil ETNs. Although international oil prices are currently fluctuating within a range, it appears that the calculation is based on the potential for a significant increase in investment demand if prices rise sharply again.
According to the financial investment industry on the 18th, Korea Investment & Securities (2 types), Samsung Securities (3 types), and KB Securities (2 types) plan to launch a total of seven crude oil ETNs next month. MERITZ Securities, Hana Securities, and Shinhan Investment & Securities are also preparing to issue products with similar conditions to existing crude oil ETNs. Despite the decline in oil prices, securities firms plan to list crude oil ETNs in accordance with existing investor demand, as they are a core product line.
These securities firms have decided to relaunch existing crude oil products with a maturity date of May 9. In the case of Korea Investment & Securities, they plan to reissue leveraged and inverse products, while KB Securities will eliminate the condition of not reflecting exchange rate fluctuations and will relaunch as a currency open type (exposing assets to exchange rate volatility occurring in the foreign exchange market). NH Investment & Securities is the only securities firm that will not reissue products with a maturity date of May 9.
ETNs track the fluctuation rates of specific assets or asset indices, and when the maturity date arrives, investors receive back their investment based on the performance of the index that the ETN is based on. Typically, when the maturity of a popular ETN approaches, securities firms relaunch new products under similar conditions, allowing existing investors to continue investing.
In 2022, as the war between Russia and Ukraine dragged on and commodity prices soared, there was a surge in demand for investment in crude oil ETNs. On April 27 of the same year alone, eight securities firms, including Korea Investment & Securities and MERITZ Securities, launched a total of 17 crude oil ETNs.
However, due to the prolonged high interest rates resulting in reduced oil demand and increased U.S. crude oil inventories, oil prices have consistently fallen. The price of West Texas Intermediate (WTI) crude oil futures peaked at $119.78 per barrel on June 8, 2022, then exhibited a downward curve. As oil prices continued to drop, DAISHIN SECURITIES' 'DAISHIN S&P WTI Crude Oil Futures' ETN was liquidated early due to a decline in its benchmark value last May.
So far this year, the WTI futures price briefly rose to $77.88 per barrel on January 12 but has fluctuated around $60 this month due to concerns over oversupply and demand instability caused by President Trump's tariff policy.
Due to the high volatility of crude oil prices, investors seeking to profit from indirect bets on oil fluctuations mainly use ETNs. Currently, out of about 400 ETN products listed in Korea, 28 are oil products, accounting for 7%. This is a significant proportion among commodity themes.
A relation from a securities firm relaunching crude oil ETNs said, 'WTI is a representative futures product line,' noting that the decision was made to relaunch it from the perspective of providing service to existing investment clients and diversifying investment products.
Investment opinions in the securities market regarding international crude oil are mixed. Sim Su-bin, a researcher at Kiwoom Securities, said, 'There has been no significant change in the oil supply and demand forecast from major energy agencies, and the decreasing trend in oil inventories is expected to continue in the first half of the year,' adding that 'it is too early to predict the impact of U.S. tariff issues, making current concerns over a supply glut in the oil market excessive.' Kiwoom Securities forecasts that oil prices will rebound.
Conversely, NH Investment & Securities has suggested a 'neutral' opinion on oil investments, viewing that the oversupply situation in the oil market will continue. Hwang Byeong-jin, a researcher at NH Investment & Securities, said, 'While oil prices are low, we advise against taking a long position betting on a rise in international oil prices.' MERITZ Securities expects that international oil prices will move within a range for the time being.