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The worldwide slump in demand triggered by the corona crisis and limited storage capacity have caused the oil price to collapse this year. Even the cut in production volumes decided by OPEC was unable to adequately counteract the fall in prices. At the end of April, the situation worsened so much that the expiring May Future contract for the US oil grade WTI was traded for up to minus USD 40 per barrel. It was the preliminary climax of a crisis that the oil market had never experienced before.
Since then, many investors have been looking for ways to position themselves for rising oil prices. However, a look at the steep forward curve reveals that a significant price increase is already being priced in by the market. This makes a direct investment in the raw material oil less attractive for many investors. In order to enable security-oriented investors to rely on a recovery in the oil market without having to trade future contracts, Raiffeisen Centrobank issues the certificate Oil & Gas Index Plus Bonus. This certificate is based on the STOXX® Europe 600 Oil & Gas Price EUR index, which is the benchmark for the European oil and gas sector.
The certificate offers the opportunity for a bonus yield of 15% (equals to 2.8% p.a.) and an unlimited upward opportunity to participate in the index development beyond the bonus level. The barrier of 60% of the index starting value serves as a protective mechanism and is only observed at the end of the term.
Redemption at the end of the term:
- SCENARIO 1a: Index closing price > 115% of the starting value
If the closing price of the STOXX® Europe 600 Oil & Gas Price EUR index quotes above the bonus level of 115% of the starting value on the final valuation date, the positive performance of the index (percentage development from the starting value to the closing price on the final valuation date) is paid out in addition to the nominal value.
- SCENARIO 1b: Index closing price ≤ 115% but > 60% of the starting value
If the closing price of the STOXX® Europe 600 Oil & Gas Price EUR index quotes at or below the bonus level of 115% but above the barrier of 60% of the starting value on the final valuation date, the redemption is effected at 115% of the nominal value. On the maturity date, investors will receive the bonus amount of EUR 1,150 per nominal value.
- SCENARIO 2: Index closing price ≤ 60% of the starting value
If the closing price of the STOXX® Europe 600 Oil & Gas Price EUR index quotes at or below the barrier of 60% of the starting value on the final valuation date, the nominal value minus the negative performance of the index (percentage development from the starting value to the closing price on the last valuation day) is paid out.
Further information as well as the Key Information Document can be found on the product detail page.
Bonus Certificates – explained shortly:
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For any additional information you may require do not hesitate to contact us on +43 1 515 20-484.
The Team Structured Products of Raiffeisen Centrobank
