Supply disruptions ease, oil market bears “flash rally”: Brent put options bets soar to unprecedented levels

The Zhitong Finance App learned that oil traders are flocking to buy options and are betting that Brent crude oil will fall. As investors re-adjusted their positions after a sharp rise in oil prices in recent trading days, bearish betting soared to an unprecedented level.

According to preliminary data from the Intercontinental Exchange (ICE) European Futures Exchange, the trading volume of Brent crude oil put options reached about 764,000 on Tuesday, setting a record. Most of these transactions focus on narrow bearish spreads, which are sometimes used to hedge against OTC binary options transactions; currently, Saudi Arabia is seeking to restore a key pipeline of oil transportation, and there are signs that diplomatic efforts around reopening the Strait of Hormuz have made some progress.

Same-day transactions exceeded the bearish spreads of 110,000 December 70/69 dollars, 40,000 November 93/92 dollars, and 38,500 February 70/69 dollars, which together accounted for more than half of the total number of contracts traded on the day.

On Tuesday, November Brent crude oil futures closed down 1.1%, and the settlement price was $99.25 per barrel. Last week, it was only one step away from $110.

The latest developments have also reversed the bullish signals of several key market indicators. The bullish option bias for the global benchmark crude oil was the least optimistic since June, reflecting a decline in the cost of hedging the risk of rising oil prices. The 9-day Relative Strength Index (RSI) of Brent crude oil futures also left the overbought zone and was above this threshold for most of last week.