Did West Texas Intermediate collapse burn US$1 billion hole in Bank of China investors’ pockets?

Bank of China’s estimate for the carnage to retail investors from the collapse in a product linked to US crude oil futures surged 11-fold to more than 7 billion yuan (US$1 billion), as it consolidated reports from its nationwide network, according to people familiar with the matter.

The estimate of losses to customers across China increased from about 600 million yuan in the middle of last week, as more information was gathered from its more than 10,000 outlets, said the people, asking not to be identified as they were discussing a private matter. The number is not final and subject to further change as more branch data is examined, one of the people said.

The losses stem from the bank settling May West Texas Intermediate contracts that underpinned its “Crude Oil Treasure” product on April 20 at minus US$37.63 a barrel, leaving Bank of China customers caught in the middle of oil’s unprecedented collapse below zero. Hundreds have taken to the internet to protest the lender’s handling of the contract rollover and to demand it shoulder some of the losses.

Bank of China declined to comment. It has not disclosed the size or performance of Crude Oil Treasure since launching the product in January 2018.

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The investment vehicle had offered Chinese retail investors access to WTI oil futures without opening an offshore account and was pegged to the flat price of the front-month contract and settled in Chinese yuan. It requires 100 per cent margin and does not allow any leverage.