Korean oil-linked exchange-traded notes (ETNs) surged this month as Middle East tensions drove international crude prices sharply higher. The Meritz Leverage WTI Crude Oil Futures ETN (H) closed at 51,490 won on July 24, up 69% from 30,465 won at the end of last month, according to Korea Exchange data released on July 26. The rally was triggered by renewed military tensions between the US and Iran, which effectively broke a June ceasefire and raised concerns about oil supply disruptions through key shipping routes including the Strait of Hormuz and Bab el-Mandeb Strait.
WTI Futures ETNs Dominate Monthly Returns
Seven of the top 10 performing ETNs this month were oil-related products. The Meritz Leverage WTI Crude Oil Futures ETN (H), which tracks twice the daily returns of West Texas Intermediate (WTI) crude futures listed on the New York Mercantile Exchange (NYMEX), led gains with a 69% return. Shinhan Bloomberg Leverage WTI Crude Oil Futures ETN B rose 61.1%, while Samsung Leverage WTI Crude Oil Futures ETN, Hantoo Leverage WTI Crude Oil Futures ETN B, and KB S&P Leverage WTI Crude Oil Futures ETN B each climbed 60.8%. These gains stood in sharp contrast to the KOSPI index, which fell approximately 21% during the same period.
September WTI Futures Climb 33% From Last Month
September delivery WTI crude futures closed at $92.19 per barrel on July 23 (local time), up 33% from the end of last month. Brent crude rose 38% over the same period. The price surge reflected growing market concerns about potential supply disruptions from the Middle East, which accounts for a significant portion of global oil production and shipping.
Korean Oil Stocks Rise on Crude Price Surge
Refining-related stocks classified as oil theme plays posted sharp gains. Korea Petroleum's stock price rose 10% this month, while S-Oil climbed 42% and Heunggu Petroleum surged 49%. The steep increases prompted increased margin trading activity, with Korea Petroleum's credit balance rising 17% this month and Heunggu Petroleum's credit balance increasing 21%.
US-Iran Tensions Escalate After June Ceasefire
The US and Iran entered a ceasefire in April following the outbreak of war in February and signed a memorandum of understanding (MOU) in June. However, the ceasefire effectively collapsed after Iran conducted successive attacks on vessels in the Strait of Hormuz and the US resumed airstrikes against Iran. Pro-Iranian Yemeni Houthi rebels recently declared a blockade of the Bab el-Mandeb Strait at the entrance to the Red Sea, further heightening supply disruption concerns.
Goldman Sachs Forecasts Brent at $120 in Q4 Under Supply Disruption Scenario
Goldman Sachs projected that Brent crude prices could exceed $120 per barrel in the fourth quarter if disruptions at the Bab el-Mandeb Strait persist. The investment bank also forecasted that prices could average $100 per barrel next year under continued supply constraints.
FAQ
What caused Korean oil ETNs to surge 69% this month?
The Meritz Leverage WTI Crude Oil Futures ETN (H) rose 69% from 30,465 won at the end of last month to 51,490 won on July 24, driven by a 33% increase in September WTI futures prices amid escalating US-Iran military tensions and concerns about oil supply disruptions through the Strait of Hormuz and Bab el-Mandeb Strait.
How much did WTI crude futures rise on July 23?
September delivery WTI crude futures closed at $92.19 per barrel on July 23 (local time), representing a 33% increase from the end of last month. Brent crude rose 38% over the same period.
What is Goldman Sachs' oil price forecast for Q4?
Goldman Sachs projected that Brent crude prices could exceed $120 per barrel in the fourth quarter if disruptions at the Bab el-Mandeb Strait continue, with potential average prices of $100 per barrel next year under sustained supply constraints.
