Home›Commodities›Energy›Traders shift away from longer-dated oil futures as wa…

Traders shift away from longer-dated oil futures as war risk persists

Morgan Stanley said many traders now focus on three to six month oil contracts, a move that has reduced liquidity in longer-term futures.

Reported · Written up by our desk · Energy

Uncertainty about how the wars in Iran and Ukraine will unfold is causing many oil traders to avoid longer-dated futures positions, Morgan Stanley said. The bank said most market participants have instead shifted to bets on prices within a three to six month window as volatility rises and the duration of war related impacts on the global oil market becomes harder to gauge.

Morgan Stanley’s co head of global oil trading Brendan Ross said traders have become more precise about their risk, deciding what outcomes they want versus what could create an unexpected bleed. He added that many are moving away from longer-dated contracts because they do not want to be on the wrong side of those trades during heightened uncertainty.

The shift toward near-dated futures has sapped liquidity in longer-term oil contracts, Ross noted. Separately, OilPrice said speculators and portfolio managers have built exposure in fuel markets that have been tighter than crude, with hedge funds moving from net short positions early in the spring to a net long position of 177 million barrels across the most traded fuel contracts, gasoline and diesel, as of September 1, according to the latest available data.

Latest closeWTI crude $94.28 ▲3.1%|Gasoline (RBOB) $3.095 ▼3.7%

More like this

Sources