Oil prices have rebounded sharply on geopolitical risk despite no meaningful supply losses.

Iran protests and the increasing probability that US President Trump would exploit that unrest for another series of strikes on Tehran have been dragging oil prices higher, boosting oil options trading in recent days. 

This Monday witnessed the busiest-ever single day of Brent crude call option trading (556,000 contracts) as market participants rushed to the market to protect themselves against sudden price spikes.

According to Bloomberg, ICE Brent’s second-month options ‘skew’ now favours calls instead of puts, signalling the arrival of high-impact geopolitical stress ahead.

In late December it seemed that market sentiment on crude would make hedge funds’ net positioning negative for the first time in 16 months (and only the second time in post-Covid years), with ICE Brent balancing on the brink of net length.

By now however, money managers are eagerly taking up long positions on crude, with the net length in ICE Brent quadrupling to 122,965 lots (as of 6 January) in just three weeks.

US President Trump has signalled that he may exclude US oil major ExxonMobil from his Venezuela drive after CEO Darren Woods called the Latin American country ‘uninvestable’, a position that Trump labelled ‘too cute’.

French oil major TotalEnergies along with Italy’s ENI and QatarEnergy, has been granted the Block 8 offshore exploration block in Lebanon’s waters, expanding its appraisal area in the Eastern Mediterranean.   

Seeking to reduce the shipping industry’s reliance on green bunkering fuels, shipping giant Maersk is seeking to boost its use of ethanol as a fuel, tapping into US and Brazilian production of the biofuel.

The world’s largest mining company BHP is set to wait out the Rio Tinto-Glencore merger talks and not to bid for the Swiss firm, potentially paving the way for the $ 210 billion megamerger.

(Oil Price)