Rally in Chemical Futures Varieties, Some Profit-Taking Investors Choose to Exit

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Securities Times Reporter Shen Ning

Affected by the Middle East situation, the international crude oil market has recently experienced volatile upward movement, triggering a collective surge in domestic energy-related 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 shipping index (European line) futures at low levels, resulting in significant gains during this rally. However, after a sharp increase in prices, 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-related futures showed strong momentum, 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, PX para-xylene, PTA, and bottle chip futures also rebounded strongly, with gains exceeding 10%.

A review of the domestic commodity market performance since March reveals that the current energy-related commodities have experienced remarkably rapid growth. 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-related commodities also gained over 30%. With about five times leverage, the margin returns for long positions in these commodities have exceeded 2 times.

According to industry sources, the explosive growth of crude oil and other commodities has significantly driven some futures company clients to open accounts, and some individual investors have also gained good profits by going long on related contracts.

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

In fact, data from the futures trading competition also provides a relatively straightforward reflection of investors’ trading situations. The Securities Times reporter observed on the Champion Trader website that participants generally showed net profits in crude oil, fuel oil, and other contracts. The intense market volatility on Tuesday caused some participants to incur large single-day losses in these contracts, but with the recent rebound over the past two trading days, their profits have been restored.

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