West Texas Intermediate traded slightly lower Monday morning (8:07 AM) to $58.85/Bbl amid broad geopolitical uncertainty
- President Trump said the US is weighing its options in response to reports of deadly crackdowns in Iran (Bloomberg)
- “We’re looking at it very seriously. The military is looking at it, and we’re looking at some very strong options,” Trump told reports Sunday on Air Force One
- Vitol and Trafigura are in discussions with large Indian and Chinese refiners over potential sales of Venezuelan crude
- Both companies have obtained a preliminary green light from the US government to market the oil
- AEGIS notes that geopolitics surrounding Iran quicky stole the limelight from developments in Venezuela last week. Current market uncertainty and risk premia is likely allocated to developments in Iran and a potential US response. A reminder, many geopolitical events in the past few years have only yielded short pops in price before relaxing shortly after. Analysts are still focused on the large oversupply predicted in the global crude market.
Oil options market skew turns most bullish since June
- As of Friday, Brent and WTI’s second-month call skews were the biggest since June, while volatility also climbed
- The move in skew is positioning in response to protests in Iran
- Money managers increased long positions in ICE Brent to the highest since November last week
- For WTI, net-longs climbed by more than 2k lots to the highest since November
- AEGIS notes that hedge fund net-length in WTI was near historical lows, which likely helped fuel last week’s rally, while geopolitical developments in Iran may have triggered additional short covering.