Bank of China's Crude Oil Treasure

A product built for customers who could not trade oil directly

In January 2018, Bank of China (BOC) launched a retail account product called Crude Oil Treasure (原油宝, Yuanyou Bao). Mainland Chinese customers could not trade foreign futures exchanges directly, so the product gave them a way to speculate on oil anyway: it tracked the front-month WTI or Brent futures price one-for-one, in yuan. It required 100% margin and offered no leverage, a structure that read as simple and safe: a customer posted the full notional value of the position, so on paper the most they could lose was their deposit. By April 2020, roughly 60,000 customers held positions in the product, according to Chinese media reports, though BOC itself has never published an official customer count.

The contract that went negative

The flaw was not in the marketing. It was in the mechanics underneath it. Crude Oil Treasure tracked the front-month WTI future, and on 20 April 2020 that contract, the May-2020 WTI future, collapsed to an intraday low of about −$40.32 a barrel and settled at −$37.63 a barrel, the first-ever negative settlement in the contract's history. Cushing, Oklahoma storage was nearly full, and traders still holding the expiring contract had to pay someone to take the delivery obligation off their hands.

A roll date that turned a market event into a design failure

BOC's rival banks saw the danger coming. Industrial and Commercial Bank of China (ICBC) and China Construction Bank rolled their own equivalent paper-oil products out of the May contract on 14 April 2020, five trading days before final settlement, and so avoided the worst of the collapse. BOC scheduled its own roll for the contract's last possible trading day, 20 April 2020, the same day the contract went negative. Some or all of BOC's retail clients were still exposed when that settlement was applied.

Investors discover a debt, not just a loss

On 21 April, Chinese media and social media carried accounts of retail investors discovering they owed BOC money, not merely that they had lost their deposit: a 100%-margined, no-leverage product had produced a debt. BOC temporarily halted new positions and said it was checking the settlement data with the CME. On 22 April, it confirmed it had applied the CME's official settlement price, based on the average trade price in the contract's final two minutes, and suspended new positions altogether. Investors disputed the methodology, some arguing the bank should have used an earlier, less extreme price or closed positions before the contract's last day.

Contagion, compensation and the regulatory reckoning

Within a week, other Chinese banks, including ICBC and Shanghai Pudong Development Bank, suspended new positions in similar commodity-linked retail products covering oil, copper and soybeans, citing the same volatility risk. On 30 April, the China Banking and Insurance Regulatory Commission (CBIRC) instructed BOC to resolve the dispute lawfully and protect customers' rights. On 5-7 May, BOC offered a compensation plan: for clients with positions up to RMB 10 million, roughly covering the large majority of the 60,000 investors, the bank would absorb losses beyond the client's original deposit and refund about 20% of that deposit. Clients above that threshold, reportedly fewer than 100 people, were told they had to bear their own losses in full.

The regulatory and legal reckoning followed later that year. On 5 December 2020, CBIRC fined BOC RMB 50.5 million (about USD 7.7 million) for failures in product design, risk management, disclosure and sales, and fined four named individuals a combined RMB 1.8 million. On 31 December 2020, a Nanjing court ruled in an investor's civil suit that BOC must return 20% of the client's principal and absorb the losses beyond it. The court found that BOC had not adequately planned for a negative-price scenario, had not warned clients of that risk while trading was live, and had not liquidated positions when the margin-adequacy ratio fell below the contractual threshold. BOC's appeal was rejected on 10 February 2021, upholding the ruling.

Why the loss total moved over time

Reported loss totals differ depending on when a given piece was written. Early press in late April 2020 cited smaller estimates, some around RMB 600 million, others "over RMB 7 billion (about USD 1 billion)". The discrepancy does not reflect an error; the full scale simply was not clear yet in the first days of the crisis. The figure that stabilised once the December 2020 court case laid out the full picture, and the one this page uses throughout, is RMB 4.2 billion lost as client margin, plus a further RMB 5.8 billion owed by clients to the bank beyond their margin, for a total of about RMB 10 billion (roughly USD 1.4 billion at the prevailing exchange rate).

A bank account dressed as a futures position

What Crude Oil Treasure actually was matters for everything that follows. It was not itself a futures contract. It was a retail bank account product that tracked the front-month WTI or Brent futures price one-for-one, in RMB, with 100% margin and no leverage. A client who bought "long" Crude Oil Treasure was economically equivalent to holding a long position in the front-month WTI future, financed entirely by their own deposit rather than by margin borrowing.

Delivery and roll mechanics near expiry

The course concept this breaks is delivery and roll mechanics near expiry, the same lesson the negative-oil case and the May-2020 WTI settlement itself illustrate. A futures price is not simply the price of oil. It also prices the obligation to take delivery, or find someone who will, at a specific place and time. As storage at Cushing, Oklahoma filled up in April 2020, holding the expiring contract into its last trading day became dangerous, because a long holder who could not take delivery had to find a buyer willing to accept that delivery problem, at any price, including a negative one.

The roll date as a bank's design choice, not a law of nature

BOC's product added a second, non-market layer on top of this mechanical risk: an operational choice about when to roll client positions out of the expiring contract. Two rival Chinese banks rolled their equivalent products five trading days before expiry and so avoided the worst of the collapse. BOC scheduled its roll for the contract's final trading day, the same day the contract happened to settle at −$37.63. The structural fact that matters is this: a product that mechanically tracks an exchange-traded future can still embed a bank-specific design decision, in this case the roll date, that decides whether the client is exposed to a known industry-wide risk at all.

Margin without leverage is not margin without risk

This also connects to margin and leverage. Because the product used 100% margin and no leverage, BOC's clients could not simply be stopped out before the contract went negative, in the way a margined, marked-to-market futures account might trigger a forced close near zero. Once the settlement price went negative, a client with 100% margin and no borrowed leverage could nonetheless owe money beyond their deposit, because the underlying instrument itself, the future, has no floor at zero. Margin without leverage still means unlimited downside if the reference price itself can go below zero.