Crude Put Skews Steady After Bearish Move Last Week

The downside Brent crude options put skew has turned more bearish in the last week and the widest since December. The move comes as front month futures are holding just above the lowest since early February after a small net decline last week.

• The return of some OPEC supply earlier than some analysts had expected is limiting upside pressure from the extended production cuts and adding to ongoing concerns for global demand amid a weaker US economic outlook and China demand growth uncertainty.
• The Brent crude second month 25 delta call-put skew has gradually widened from -1.7% on May 13 to -3.7% today. WTI second month skew also fell to the most bearish since December at -4.5% on May 31 before edging back to -4.1% today.
• The Dec24 call-put skews have continued to widen after Brent reached as narrow as -1.4% in mid April. The Brent Dec24 skew is today at -3.2% while the WTI Dec24 skew is around -4.0%.
• Implied crude market volatility is today back down slightly with Brent second month at 23.6% and WTI at 24.9% after gains last week driven by uncertainty over the OPEC+ meeting decision.
• Aggregate crude traded volumes since May 28 have averaged above normal with Brent futures around 1.17m and options at 180k and WTI futures volumes at 0.86m and options of 141k.
  • Brent AUG 24 up 0.2% at 81.27$/bbl
  • WTI JUL 24 up 0.2% at 77.13$/bbl

Source: Bloomberg