In an era of "resources are paramount," which index could "purely" enjoy the dividends of the oil and gas cycle?

Ask AI · How does the San Tong Oil dividend strategy reshape industry valuation?

Recently, as Middle East geopolitical tensions suddenly escalated, the Strait of Hormuz—the “throat” through which about one-fifth of global oil trade passes—has been thrust into the spotlight. Brent crude oil prices surged past $80 per barrel (as of 26/3/3). With rising geopolitical risks, oil and gas prices have sharply increased, and the market has suddenly become aware of the fragility of oil supply. Expectations for a faster recovery of the overall oil and petrochemical cycle have also improved. Against this backdrop, the investment logic of the oil and gas industry chain has become clearer than ever—short-term geopolitical premiums, medium-term profit and shareholder return improvements, and long-term strengthening of national energy security and refining upgrades. So, which index tools can better focus on the opportunities for the oil and gas industry cycle to start?

The China Securities Petroleum and Natural Gas Index is a high-quality option to capture the benefits of the oil and gas cycle: (1) Structurally, it leans toward upstream and midstream, with stronger resource attributes, truly “mined” oil and gas index; (2) Its constituent stocks are more dominated by central enterprise leaders, with “San Tong Oil” and related companies accounting for nearly 50%; (3) It has superior long-term returns, with an annualized return of 15.85% over the past five years, significantly outperforming comparable indices. The E Fund Guozhen Petroleum and Natural Gas ETF (159181) tracking this index is highly regarded!

1. Distinct resource attributes, truly “mined” oil and gas index

Focusing on beta opportunities in the oil and gas industry essentially involves investing in resource commodity cycles. The key factor is the resource content and purity of the underlying stocks. The China Securities Petroleum and Natural Gas Index emphasizes upstream and midstream sectors with stronger resource attributes, potentially benefiting fully from rising oil prices.

The oil and gas industry can be divided along the industry chain into upstream: exploration and production, supporting oilfield services and energy equipment; midstream: transportation; downstream: refining, trading, and gas supply. The index’s sector composition emphasizes midstream, upstream, and resource-rich refining and trading companies like PetroChina and Sinopec, which together account for 67.5% of the weight.

Chart: Oil and gas industry structure and the weight distribution of the China Securities Petroleum and Natural Gas Index across segments

Data source: Wind, weights as of 2026/1/30

Table: Higher resource content in upstream, midstream, and “San Tong Oil” targets within the China Securities Petroleum and Natural Gas Index

Data source: Wind, weights as of 2026/1/30

2. High concentration of central enterprise leaders, nearly 50% within the “San Tong Oil” system, benefiting from central enterprise market value management, enhancing shareholder returns

Regarding China’s oil and gas industry, the term “San Tong Oil” is essential. These three major state-owned oil companies are the backbone of national energy security and the foundation of building an energy powerhouse. Compared to other indices, the China Securities Petroleum and Natural Gas Index has a higher “San Tong Oil” weight—about 40%—and nearly 50% within the “San Tong Oil” system, higher than comparable oil and gas industry indices.

Table: Higher concentration of leading stocks in the China Securities Petroleum and Natural Gas Index, with greater exposure to “San Tong Oil”

Data source: Wind, weights as of 2026/1/30

Under the optimization of the “one profit, five ratios” assessment mechanism for central enterprises and the active guidance of market value management policies, “San Tong Oil” companies are moving toward high-quality development. Their ability and willingness to continuously improve shareholder returns are strengthening. For example, CNOOC announced on January 22, 2025, an increased dividend payout ratio, with a target of no less than 45% for 2025–2027, up from the 40% commitment for 2022–2024. More generous shareholder returns are expected to help reshape the valuation of leading central enterprise oil and gas companies.

Chart: Recent years’ dividend payout ratio as a proportion of net cash flow from operating activities for the “San Tong Oil” companies

Data source: Wind, as of H1 2025

3. Long-term performance is superior, with significant excess returns over comparable indices

Thanks to the advantages in constituent stocks and industry structure, the China Securities Petroleum and Natural Gas Index has also outperformed other oil and gas indices over the long term. It has delivered excellent long-term performance, with positive returns for five consecutive years from 2021 to 2025. As of 2026/2/27, the cumulative return over the past five years is 103.98%, with an annualized return of 15.85%. It significantly outperforms the CSI Oil & Gas Industry Index and the CSI Oil & Gas Resources Index, showing resilience during market corrections and higher Sharpe ratios compared to comparable indices.

Table: Annual return comparison between the China Securities Petroleum and Natural Gas Index and comparable indices

Data source: Wind, as of 2026/2/27

Chart: Long-term performance of the China Securities Petroleum and Natural Gas Index surpasses comparable indices

Data source: Wind, as of 2026/3/3

The short- and long-term allocation logic for China’s oil and gas industry is coherent: the short-term catalyst is strong—oil and gas react intensely to global geopolitical shocks and benefit deeply; the long-term value is substantial—upstream and downstream petrochemical industries fluctuate, and the shareholder return capacity and willingness of central enterprise leaders are strengthening, creating valuation uplift opportunities. The E Fund Guozhen Petroleum and Natural Gas ETF (159181), tracking the China Securities Petroleum and Natural Gas Index, features strong resource attributes, high “San Tong Oil” content, and excellent long-term performance, making it a convenient tool to monitor positive industry cycles and valuation revaluation opportunities.

Note: The management fee for the E Fund Guozhen Petroleum and Natural Gas ETF (159181) is 0.15% per year, with a custody fee of 0.05% per year. Investors may be charged a commission of up to 0.3% when subscribing or redeeming, by the subscription/redemption agent broker, including related fees charged by stock exchanges, registration, and settlement institutions.

Risk reminder: The above research report’s data does not predict future performance of the relevant funds and is not a guarantee of investment returns or investment advice. It is only intended to show current industry development trends. The content does not represent the company’s views, nor does it predict market or industry trends, and does not constitute investment actions or advice. Holders should make investment decisions prudently based on their own risk tolerance. This material is not a promotional or marketing document for any of the company’s services, nor a legal document. The fund manager commits to managing and using fund assets honestly, diligently, and responsibly but does not guarantee profits or minimum returns. Past performance and awards do not predict future results. Investors should not rely solely on this information for decision-making. Funds are risky; investments should be cautious.

Before investing, investors should carefully read the “Fund Contract” and “Prospectus” and understand the risk-return characteristics of the fund. Based on their understanding of the product and after listening to the suitability opinions of sales institutions, they should make independent investment decisions according to their risk tolerance, investment horizon, and goals, and choose appropriate fund products. The full risk disclosure is available on the E Fund official website.