Investment Evolution Theory | Before investing in oil and gas indices, you should know these!

Ask AI · Which of the three major oil and gas indices has the strongest resource attribute?

Recently, international geopolitical risks have been heating up, coupled with localized supply disruptions. Energy prices have risen significantly, and the oil and gas sector has become a major focus for the market. The oil and gas industry is a typical cyclical sector, and it also has clear dividend/capital-return characteristics. In a high-volatility market environment, the industry’s “resources + dividends” dual traits have made it especially prominent right now. Before investing in this popular sector, what core knowledge do investors need to understand? Below, GF Fund will analyze, for you one by one, from three dimensions: the four major oil and gas segments, the differences among the three major indices, and the key points for allocation.

The Four Major Segments of Oil and Gas

Many investors are tempted by oil and gas investing, but it is not as simple as “betting on oil prices,” nor does a rise in oil prices automatically lead to a uniform increase across the entire industrial chain. Overall, the oil and gas industrial chain can be broken down into four sub-segments: resources, oilfield services, refining and processing, and piped gas (or natural gas distribution and sales). The investment logic and influencing factors for each segment also differ.

The resource segment is the part with the closest correlation to oil prices. It mainly refers to upstream enterprises engaged in oil and gas exploration and production. This segment is positively correlated with oil prices, and among several segments it has the highest profit elasticity, but it is also constrained by taxes and capital expenditures.

The oilfield services segment mainly covers drilling, completion, and various technical service businesses for oilfields. The segment’s performance is closely related to the capital spending of upstream oil and gas companies. This segment also shows a positive correlation with oil prices, but due to the influence of investment decisions and project execution cycles, order releases are typically lagging oil prices, giving it an overall “post-cyclical” characteristic.

The refining and processing segment is divided into traditional refining and new-style refining and processing. Its performance is influenced by multiple factors, including oil price levels, product price differentials, the capacity cycle, and the macroeconomic cycle, making its profit logic relatively complex.

The piped gas (natural gas) segment mainly involves the transmission, distribution, and sales of natural gas. Its profitability depends more on the company’s resource acquisition capability and its ability to price in a timely manner. Overall, its business attributes are closer to those of a public utility. This segment is relatively less sensitive to oil price fluctuations, but it can be affected by factors such as gas price policies and changes in seasonal demand.

Comparison of the Three Major Oil and Gas Indices

For domestic oil and gas underlying assets, the market currently has three main oil-and-gas-related ETF index products, which track the following respectively: the CSI Guo Zheng Petroleum & Natural Gas Index, the CSI Oil & Gas Industry Index, and the CSI Oil & Gas Resources Index.

GF Fund compares the differences among these three indices one by one in terms of sub-industry distribution, weighted constituent stocks, historical performance, and more.

I. Differences in Sub-Industry Distribution

From the sub-industry distribution table, the CSI Guo Zheng Petroleum & Natural Gas Index centers on the petroleum and natural gas industries, with an overall weight of 53%. The weights for oil and gas extraction and oilfield services are 20%, and for piped gas it is 13%. Overall, this index covers an industry industrial-chain closed loop spanning “the source to the end terminal,” combining resource attributes with the attributes of natural gas public utilities. It places more emphasis on the resource attributes in the mid-to-upper segments. Compared with the other two indices, the CSI Guo Zheng Petroleum & Natural Gas Index is more focused on the main oil-and-gas industrial chain, making it more “pure.”

The CSI Oil & Gas Industry Index also covers the entire industrial chain, but the combined share of petroleum and natural gas is relatively lower. It mainly includes the refining and processing and chemical segments, and it also covers a small number of more peripheral industries such as general-purpose machinery, steel, power, and the electric power grid.

The CSI Oil & Gas Resources Index also covers the industrial chain broadly. Petroleum and natural gas account for nearly half. Within the three indices, oil and gas extraction and oilfield services stand out most with a weight of 29%, and the weight of the transportation industry is also relatively higher.

Figure 1: Comparison of Index Sub-Industry Distribution

Source of data: Wind, as of March 26, 2026. Using the CSI three-level industry classification.

II. Differences in Weighted Constituent Stocks

Both the CSI Guo Zheng Petroleum & Natural Gas Index and the CSI Oil & Gas Resources Index focus on the main industrial chain of petroleum and natural gas. Among them, the CSI Guo Zheng’s “Three Oils” (China National Petroleum, China Petroleum & Chemical, and China National Offshore Oil) have higher weights. They currently rank among the top three weighted stocks, with a combined weight of 37%, which is significantly higher than the other two oil and gas indices. This means that the index has a stronger correlation with oil prices, its resource attributes are more prominent, and at the same time, because the proportion of SOEs is high, its dividend/bonus-return attributes are also relatively more obvious.

In the CSI Oil & Gas Industry Index, the weighted stocks include not only the “Three Oils,” but also industry targets such as oilfield services, oil transportation (oil shipping), and chemicals. Among the top ten weighted stocks, the concentration is relatively lower than in the other three indices.

In the weighted stocks of the CSI Oil & Gas Resources Index, oilfield services engineering companies and oil transportation (oil shipping) have higher weights, so it can better reflect the business cycle conditions for oilfield services and the elasticity of freight rates.

Figure 2: Comparison of Index Weighted Constituent Stocks

Source of data: Wind, as of March 26, 2026. The above information is only an introduction to the top ten weighted constituent stocks of the index and does not constitute any investment advice. The index provider may adjust the index compilation methodology in the future; the composition of constituent stocks and their weights may change dynamically. Investors should exercise caution.

III. Comparison of Historical Performance

Judging from the historical performance of the three indices, as of March 26, the CSI Guo Zheng Petroleum & Natural Gas Index’s cumulative return over the past five years is 111.86%, with an annualized return of 16.76% and an annualized Sharpe ratio of 0.72. All are higher than the corresponding indicators of the CSI Oil & Gas Industry Index and the CSI Oil & Gas Resources Index; regarding volatility, its annualized volatility is slightly higher.

Overall, among the three indices, the CSI Guo Zheng Petroleum & Natural Gas Index benefits from a more concentrated allocation to the “Three Oils,” oilfield services, and leading natural gas operators. In periods when industry conditions are moving upward, it can better enjoy the positive effects brought by improved profitability along the upstream main chain. In such stages, its performance often outperforms that of comparable indices.

Figure 3: Comparison of the Indices’ Historical Performance Over the Past Five Years

Source of data: iFinD, from March 26, 2021 to March 26, 2026. Annualized return = [(1 + interval price change percentage)^(250/number of trading days in the interval) − 1] * 100%; annualized volatility = {∑[(Ri − ∑Ri/N)^2]/(N − 1)}^0.5 * 250^0.5. The calculation period is based on daily frequency; N is the sample interval size, and Ri is the interval return. Annualized Sharpe ratio = (annualized return − risk-free return) / annualized volatility, where the risk-free return is the one-year term deposit rate (pre-tax). Past index performance does not predict future performance; investors should exercise caution.

Investment Considerations for Oil and Gas Indices

As shown in the chart below, since 2021, the correlation between oil and gas indices and the SSE Composite Index is not very high. This means that, from the perspective of asset allocation, including oil and gas assets in an investment portfolio and leveraging their differentiated sources of returns can help optimize the portfolio’s overall risk-return structure.

Figure 4: Index Curve Trends from 2021 to Present

Source of data: iFinD, from March 26, 2021 to March 26, 2026. Past index performance does not predict future performance; investors should exercise caution

Of course, investors also need to note that the oil and gas sector’s volatility is not low. As mentioned earlier, over the past five years, the three oil and gas indices’ annualized volatility has been around 24%. It is recommended that investors set a reasonable allocation proportion based on their own risk tolerance and investment objectives, and avoid concentrating funds excessively in the oil and gas sector.

Over the years, GF Fund has consistently built an all-around asset management capability across multiple asset classes, multiple markets, and multiple strategies. It has now formed a comprehensive and complete product体系, which can provide investors with 24/7 investment tools and solutions, meeting investment needs under different economic cycles and market environments.

GF Fund will see you next time!

(Source: GF Fund Management Co., Ltd.)

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