Oil Market Is Short On Conviction And Positioning
By Alex Longley, Bloomberg markets live commentator and reporter
Last year a much-loved phrase of Goldman’s commodity guru Jeff Currie was that the oil market was long on conviction, short on position -- in the third quarter, the oil market has been short on both conviction and position.
Currie’s premise last year was that a huge chunk of the oil market was bullish but that traders weren’t backing those in a big way. Right now, the oil market is gripped by a whirlwind of headlines -- a cap on Russian oil prices, a surprise OPEC+ cut, a global growth slowdown and the potential return of Iranian oil supplies to name but a few -- but options trades show the huge spread of views out there.
On Monday, 5,000 Brent $200 calls for October traded. A cheap punt on higher prices, pretty straightforward. But on the same day, another trader was buying ratio $70/$75 put spreads for October. A cheap bet on a collapse in prices over the next two weeks.
With futures open interest generally falling as well, it’s clear that the oil market remains light on position. But what the options market tells us right now, is that unlike the pre-war oil market, lots of traders are also struggling with conviction in the face of big intraday price swings.
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