Overview
Onyx Spot Crude Oil is a fully collateralised Exchange Traded Commodity (ETC) designed to provide investors with a total return exposure to prompt weekly Dated Brent futures contracts that are continuously rolled on a pre-determined rolling schedule.
The ETC aims to replicate the Daily Dated Brent future for a specific week by tracking the weekly average of the Daily Dated Brent Future listed on major exchanges (ICE Code: DDB, CME Code: A7G) and providing the interest revenue adjusted to reflect fees and costs associated with the product.
For example, if the ICE Daily Dated Brent Future average for a specific week rises by 1% over a day, then the ETC will rise by 1%, excluding fees. However if the Daily Dated Brent Future average for a specific week falls by 1% over a day, then the ETC will fall by 1%, excluding fees.
Why Invest?
- Gain exposure to spot crude oil prices in the North Sea. Major oil traders, refineries and producers price and hedge their crude oil cargoes loading in the North Sea using the weekly average of Daily Dated Brent Futures contracts. As an active contract traded by physical players at the most important benchmark for global oil, the fund aims to give investors a return on pure spot physical crude oil prices.
- Onyx Spot Crude Oil tracks the Daily Dated Brent Future which is far more reflective of spot crude oil physical loadings just 1 to 2 weeks from today, compared to Brent Futures which reflect prices 2 months from today.
- Listed and fully collateralised.
- Transparent performance and fees.
- Easy to invest: Everything in one product which does not require the investor to manage storage, insurance or delivery of Crude Oil.
- Risk Management: You cannot lose more than the amount invested.
- Liquidity: Trades on both the ICE and CME exchanges with codes DDM and A7G respectively.
The Onyx Spot Crude Oil Settlement Price (“SCO”) is calculated on each Business Day using the applicable Settlement Prices for the average of the week ICE Daily Dated Brent Future (ICE Code: DDB).
Daily Dated Brent Futures are cash settled futures and are traded in daily contracts (D0, D1, D2, etc where D0 = the current day). These can be placed into weeks (W0, W1, W2, etc where W0 = the current week) and each week is the average of the Daily Dated Brent Contracts for each pricing day Monday to Friday.
To ensure continuous exposure, the fund holds a full week’s futures (eg. 5 Daily Dated Brent Contracts, one for each business day of the week) two weeks forward from the current week (W2) and shifts to the following week (W3) during the Roll Period.
The “Roll Period” is used in this Methodology to refer to the second and third Business Days of the week, during which time the value of SCO is gradually shifted from the utilization of W2 futures to the utilization of W3 futures, at a rate of 50% per Business Day.
The manner in which SCO is calculated on a given Business Day depends on which of three periods during the month in which this day falls:
- the period prior to the Roll Period;
- the Roll Period, or;
- the period following the Roll Period
On Business Day 1 of the week, SCO is calculated as follows: SCO = W2 ICE Daily Dated Brent Future Settlements (where W2 = all the Daily Settlements falling within the second week from today).
*On Business Day 1 of the month, prior week W3 becomes W2.
On each day of the Roll Period, the dependence of SCO is shifted, at the rate of 50% per day, from W2 to W3.
On Business Day 2 of the week, SCO is calculated as follows: SCO = W2 ICE Daily Dated Brent Future Settlements * 0.50 + W3 ICE Daily Dated Brent Future Settlements * 0.50.
On Business Day 3 of the week, SCO is calculated as follows: SCO = W2 ICE Daily Dated Brent Future Settlements * 0.00 + W3 ICE Daily Dated Brent Future Settlements * 1.00.
On Business Days 4 and 5 of the week, SCO is calculated as follows: SCO = W3 ICE Daily Dated Brent Future Settlements (where W3 = all the Daily Settlements falling within the third week from today).
An illustrative example is shown below, where W0 = the current week (eg. on 15th February 2024, W0 = 12-16 February 2024, W1 = 19-23 February 2024, W2 = 26 Februay – 01 March 2024, W3 = 4-8 March 2024).
| Business Day of Week | W0 | W1 | W2 | W3 | W4 | Sum |
|---|---|---|---|---|---|---|
| Business Day 1 | 0% | 0% | 100% | 0% | 0% | 100% |
| Business Day 2 | 0% | 0% | 50% | 50% | 0% | 100% |
| Business Day 3 | 0% | 0% | 0% | 100% | 0% | 100% |
| Business Day 4 | 0% | 0% | 0% | 100% | 0% | 100% |
| Business Day 5 | 0% | 0% | 0% | 100% | 0% | 100% |
A futures contract is an agreement to purchase a commodity at an agreed price, with settlement and payment to take place at a specified point in the future. Futures contracts are generally disposed of just before the term of the contract begins to settle and new contracts entered into in order to maintain 100% exposure to the underlying commodity (a process known as 'rolling').
The contracts being purchased may be more expensive than the contracts being sold which would cause an investor in commodity futures to make an additional loss. This market trend is known as 'contango'. Alternatively the contracts being purchased may be cheaper than the ones being sold which would result in an additional gain, known as 'backwardation'. This price difference is commonly referred to as "roll yield".
As the notional value of futures is maintained (excluding fees), the roll yield may have an impact on the volume of underlying futures held. However the notional value of the underlying futures and hence the value of the ETC itself should not be affected.
