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Bank of China "deeply disturbed" about investors' loss on oil products

BEIJING (Reuters) - Bank of China (BoC) 601988.SS3988.HK said on Friday it was deeply disturbed by the losses of investors who had invested in its crude oil futures trading product and would work to protect their interests.

Investors were crying foul over the bank’s decision to settle the trades at historic negative prices, claiming it should have done more to protect them.

BoC said in a statement late on Friday that it had sent several messages via various channels, including SMS and phone calls, since April 6 to remind investors of the risks regarding the recent fluctuation in oil prices.

“Under the circumstances of the global (coronavirus) epidemic, and volatile fluctuations in the crude oil market, Bank of China is deeply disturbed by the losses of investors in the crude oil ‘bao’,” it said.

BoC's crude oil "bao", or treasure, is a structured product marketed to retail investors that is directly linked to domestic and foreign crude oil futures contracts, including WTI CLc1 and Brent LCOc1.

U.S. WTI futures fell below $0 per barrel on Monday for the first time, ending at a stunning minus $37.63 per barrel as traders paid to get rid of oil.

“We will do our best to protect the interests of clients and will relay the latest developments to them in due course,” BoC said in the statement.

It added that it would continue to actively communicate with related institutions regarding the unusual price movements in the crude oil market on April 20.

Global oil prices have plunged this year due to the widening economic impact of the coronavirus pandemic, a price war triggered by major producers Saudi Arabia and Russia, and a shortage of storage for excess oil.

When WTI futures ended in negative territory on Monday, many crude oil-linked products racked up major losses, including the “bao”.

BoC said about 46 percent of its customers actively settled their contract positions and exited the market, with about 54 percent rolling over their positions or settling on the due date, which was also on Monday.

The BoC’s “bao” allows investors to roll over their own positions into coming months, or automatically settles them on the final trading day of an expiring contract. The collapse in WTI futures occurred on the May contract’s last trading day.

Reporting by Leng Cheng in Beijing, Emily Chow in Shanghai, Writing by Meg Shen in Hong Kong, editing by Louise Heavens, Kirsten Donovan

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