After a US–Iran peace agreement sent crude futures sharply lower, previously
dormant OTC option positions betting on an oil supply glut have resurfaced.
Before a US strike on Iran, some traders had positioned for contango (near-month
below forward months); the subsequent conflict flipped the curve into strong
backwardation — in late April WTI August traded >$5/bbl above September and
September ~ $4/bbl above October. That move left more than 20,000 cash-settled
put contracts (≈20 mln bbl/month) nearly worthless. With inter-month spreads now
narrowed to under $1/bbl and prices back near pre-conflict levels, those puts
have regained reference value. CFTC weekly data show hedge funds and other large
specs cut net-long Brent to a six-month low, down roughly 75% since end-March,
indicating materially more bearish directional positioning.
