Oil glut bets back in play as crude sinks after US-Iran deal
But the market could turn around and rally again if the agreement were to fall apart
Published Sun, Jun 21, 2026 · 10:31 PM
A SLEW of all-but-forgotten niche option positions betting on an oil glut are coming back into play as crude futures slump following a peace deal between the US and Iran.
Before the US attacked Iran, some traders had bet that a surplus of crude oil would pull near-term prices below later futures, a market structure known as contango.
After the attack, however, prompt prices soared on concern about supply shortages. In late April, August West Texas Intermediate crude futures briefly surged above US$5 a barrel over the September contract, which in turn was US$4 above October.
The rally meant that more than 20,000 contracts, equivalent to 20 million barrels per month, of financially settled put option positions betting that those spreads would sink below zero were all but worthless. Now, with the gap between those contracts back below US$1, the options are becoming relevant again.
To be sure, the market could turn around and rally again if the peace deal were to fall apart.
It will likely take some time for shipments through the Strait of Hormuz to return to regular levels, and moving the tankers will not instantly refill storage tanks that have been drained over the past months, which may stem further price declines.
It is not just the bearish curve bets that are coming into focus as prices retreat to pre-war levels. Outright positioning is becoming more bearish.
The latest Commodity Futures Trading Commission weekly data showed that money managers and other large speculators held the smallest net-long position in six months in international benchmark Brent, down by almost three-quarters since the end of March.
The premium for two-month Brent call options has all but disappeared, after reaching more than 30 points in mid-March, when flows of oil were curtailed and supply fears gripped the market.
Now, while it will take a while for shipments to normalise, assuming the deal is finalised and holds together, options are pricing more balanced risks.
Some more bearish bets are hitting the market now. About 100,000 lots – equal to 100 million barrels – of September Brent US$70/US$69 put spreads traded on Wednesday (Jun 17), and another 41 million barrels of US$71/US$70 spreads on Friday.
Those are likely a dealer hedging large over-the-counter digital option bets that prices will drop below US$70 to US$71 a barrel over the next month or so.
Even before that trade, there were large existing positions littering the market on the way down, with about 45,000 contracts open in each of the August and September Brent US$75 strikes, for example.
That could potentially accelerate a decline if dealers that are short options need to sell futures to balance their positions. BLOOMBERG
