OIL OPTIONS: Crude Options Return to Put Bias but Call Volumes Remain High

Brent crude call option traded volumes rose to the second highest on record on Aug 19 driven by large call spreads for November. Despite the recent bearish moves, the market remains wary of upside risks, for example from any Middle East supply disruption or changes in OPEC+ output policy.

• Daily Brent crude option traded volumes increase to 418k yesterday of which 339k were from call volumes.
• The front month future has seen a pullback since Aug 12 amid easing Middle East risk sentiment and with ongoing uncertainty surrounding future China and US demand growth and risk of a future supply surplus.
• The crude call-put skew also suggests a lower upside price risk with a return to a bias to puts over calls. The Brent second month 25 delta call-put spread is back to -0.9% today from a high of nearly 3.9% on Aug 12 while the WTI second month skew is down to -1.5% today.
• The Brent Dec24 call-put skew has continues to pull back to -1.5% while the WTI Dec24 spread is back down to -2.2%.
  • Brent OCT 24 up 0.1% at 77.75$/bbl
  • WTI OCT 24 up 0.1% at 73.75$/bbl

Source: Bloomberg