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ICBC’s Account-based Energy Products Popular among Investors

With relatively greater volatility in international energy prices this year, energy products become more and more popular among investors. In the first four months of 2018, ICBC recorded a trading volume of account-based crude oil of more than 40 million barrels, and that of account-based natural gas of over 650 million MBtus, posting a historical high.

According to ICBC, the Bank launched the account-based crude oil investment & trading product in March 2013, being the first to do so among its domestic peers. By calculating portions only without the withdrawal of physical oil, it could provide customers with innovative financial service of trading in crude oil portions in RMB or USD. In November 2016, the Bank took the lead again in launching the account-based natural gas product, further meeting customer demand for investment in international energy market.

Industry practitioners said the continued increase in the number of people trading in account-based energy and new highs created in trading volume in recent years can be attributed to two reasons. First, with sharp volatility in the prices of energy including crude oil and natural gas, ICBC’s account-based energy trading business has brought into full play its investment and hedging attributes. Take the account-based crude oil product for example, its price is somewhat correlated to the prices of daily consumables such as gasoline and diesel. In addition to gaining investment returns, individual investors trading in account-based crude oil, to a certain degree, can also hedge against risks in price volatility of crude-related commodities, as the product can play a hedging role to hold value. For example, when rising gasoline prices push up the cost of transportation, investors can buy ICBC’s account-based crude oil in advance to offset the extra expense of refueling with the gain from the increase in crude oil prices, making sure their quality of life remains unchanged. Whereas in the case of falling oil prices, investors can gain price spreads through short-selling. Second, the threshold for account-based energy investments is low, and the trading is convenient. The minimum trading volume for account-based crude oil and account-based natural gas is 0.1 barrel (at around RMB45) and 1 MBtu (at around RMB20).

In recent years, ICBC has attached great importance to strengthening innovation and development of investment products, and built an account-based product system covering five product categories, including precious metal, foreign exchange, energy, base metals and agricultural products. The Bank’s account-based products feature low trading thresholds, wide varieties, broad channels and real-time clearing, thereby providing a convenient channel for domestic individual investors to invest in commodity market. According to statistics, since the launch of its account-based business, ICBC has recorded a total turnover of more than RMB3.5 trillion, serving over 25 million customers.