Supply disruptions ease, oil market bears “swiftly gather”: Brent put option bets surge to unprecedented levels

According to information obtained by the Zhihui Finance APP, oil traders are flocking to buy options, betting on a decline in Brent crude oil. As investors readjust their positions following a sharp rise in oil prices over the past several trading days, bearish bets have surged to unprecedented levels.

Preliminary data from ICE Futures Europe shows that on Tuesday, the trading volume of Brent crude oil put options reached approximately 764,000 contracts, setting a historical record. Most of these trades were concentrated in narrow put spreads, which are sometimes used to hedge over-the-counter binary options trades. Meanwhile, Saudi Arabia is seeking to restore the flow of a key pipeline, and there are indications that diplomatic efforts to reopen the Strait of Hormuz have made some progress.

On the same day, more than 110,000 December 70/69-dollar, 40,000 November 93/92-dollar, and 38,500 February 70/69-dollar Brent put spreads were traded, collectively accounting for more than half of the day's total option volume.

On Tuesday, November Brent crude oil futures closed down 1.1%, settling at 99.25 dollars per barrel, having been just shy of 110 dollars last week.

The latest developments have also reversed several key bullish market signals. The skew for bullish options on the global benchmark oil is the least optimistic since June, reflecting a decrease in the cost of hedging against rising oil prices. The 9-day Relative Strength Index (RSI) for Brent crude oil futures has also exited from the overbought zone, after spending most of last week above this threshold.