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OIL: Brent Options Skew Turns Slightly Less Bullish

OIL
BulletEnergy BulletsCommodities

The bullish Brent crude options skew is softening slightly today and WTI skew turning more negative as futures continue to pull back from a high mid last week. The skew to the upside was driven by tighter global supply concerns due to sanctions on Russia and Iran but ongoing China demand concerns and potential for increased OPEC+ supply in Q2 are helping to limit upside.

  • Front month crude is pulling back after U.S. President Donald Trump declared a “national energy emergency” to be able to increase US domestic oil and gas production and reverse Biden’s climate change policies.
  • The slightly higher US dollar today has added to the oil price downside. Trump said on Monday night that he planned to impose previously threatened tariffs of as much as 25% on Mexico and Canada by Feb 1.
  • The Brent second month 25 delta call-put volatility skew has eased lower to about 0.7% today and the WTI skew is now around -0.4%.  
  • Aggregate Brent crude traded volumes have fallen in the last couple of sessions back to near normal after the high levels seen early last week. Options traded volumes yesterday showed more call volumes than puts again after a brief switch in favour of put volumes on Jan. 17.
    • Brent MAR 25 down 1.3% at 79.14$/bbl
    • WTI MAR 25 down 2% at 75.84$/bbl

 

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The bullish Brent crude options skew is softening slightly today and WTI skew turning more negative as futures continue to pull back from a high mid last week. The skew to the upside was driven by tighter global supply concerns due to sanctions on Russia and Iran but ongoing China demand concerns and potential for increased OPEC+ supply in Q2 are helping to limit upside.

  • Front month crude is pulling back after U.S. President Donald Trump declared a “national energy emergency” to be able to increase US domestic oil and gas production and reverse Biden’s climate change policies.
  • The slightly higher US dollar today has added to the oil price downside. Trump said on Monday night that he planned to impose previously threatened tariffs of as much as 25% on Mexico and Canada by Feb 1.
  • The Brent second month 25 delta call-put volatility skew has eased lower to about 0.7% today and the WTI skew is now around -0.4%.  
  • Aggregate Brent crude traded volumes have fallen in the last couple of sessions back to near normal after the high levels seen early last week. Options traded volumes yesterday showed more call volumes than puts again after a brief switch in favour of put volumes on Jan. 17.
    • Brent MAR 25 down 1.3% at 79.14$/bbl
    • WTI MAR 25 down 2% at 75.84$/bbl

 

Keep reading...Show less