Near Term Crude Options Less Bearish but Dec24 Put Skew Increases

The near term crude option downside skews have reduced to regain ground from the start of the week with prices supported by falling inventories and a supply deficit largely expected in the second half this year. Saudi Arabia is soon expected to announce an extension of its 1mbpd voluntary output reduction into October while Russia is also discussing with OPEC+ the possibility of extending exports cuts.

• The second month Brent and WTI 25 delta call-put skews are back up to -4.0% compared to a low of around -4.75% last week. The second month WTI skew is the least bearish since 16 August.
• Longer term skews have however continued the more bearish trend seen throughout August to the lowest since April. Economic growth expectations in US and China are less bullish after further soft manufacturing data from China and with the risk of more US Fed rate hikes adding to future downside demand pressure. Friday’s US payroll data is important for the market for direction on Fed policy.
• The Dec24 Brent call-put skew has fallen from around -6.5% in mid-August down to -7.15% while the Dec24 WTI skew is down from around -6.8% to -7.6%.
  • Brent NOV 23 up 0.1% at 85.32$/bbl
  • WTI OCT 23 up 0.2% at 81.77$/bbl

Source: Bloomberg