Oil hedging activity hits record in October as traders eye market risks
Record trading volumes driven by Middle East conflict, 2025 supply-demand concerns
ICE, CME Group report record trading volumes in October
OPEC+ production decisions, weak demand outlook influence hedging activity
By Georgina McCartney
HOUSTON, Nov 5 (Reuters) -Investors ramped up oil futures and options trading in October to record levels in a bid to hedge growing uncertainty as war rages on in the Middle East and a bearish 2025 supply and demand outlook looms, triggering big swings in crude prices.
Hedging can help producers reduce risk and protect their production from sharp moves in the market by locking in a price for the oil. It can also give traders opportunities to profit in times of volatility.
Some 68.44 million barrels of oil in futures and options were traded in October, according to data from the Intercontinental Exchange (ICE), surpassing the monthly record hit in March 2020 when Brent futures LCOc1 plummeted roughly $30 per barrel as the COVID-19 pandemic crushed global oil demand.
CME Group, meanwhile, reported a single day volume record for weekly crude oil options on Oct. 18, with 58,132 contracts traded.
Aegis Hedging, which has a client base with a production profile of about 25-30% of total U.S. barrels of oil equivalent, saw the highest number of trades in October in the company's history, jumping by around 15% above the previous monthly record.
"Bullish surprises like possible attacks on oil infrastructure are the sorts of events to spur activity among clients and cause jitters in the market," said Jay Stevens, director of market analytics and fundamentals at Aegis Hedging.
Investors spent much of October waiting on Israel's response to an Iranian missile attack on Oct. 1, concerned a retaliation could involve strikes on the country's oil infrastructure. Israel's strikes some weeks later bypassed Iranian oil facilities and did not disrupt energy supplies.
This shrank oil's geopolitical risk premium, analysts said, with Brent crude futures LCOc1 tumbling by around $4 a barrel the following trading day.
Brent traded within a wide range in October, with lows and highs swinging between $70 and $81 per barrel. Last quarter, Brent crude futures slid 17%, while West Texas Intermediate crude futures fell by 16%, according to data from LSEG.
"When you see futures prices get very volatile because of geopolitical and a range of other uncertainties, the market often looks to options as a way to manage risk in a more efficient way," said Jeff Barbuto, global head of oil markets at ICE.
Investors traded more than 8.38 million barrels in Brent options in October on the ICE, surpassing the April 2024 record of 6.02 million barrels.
SLUGGISH DEMAND BALANCE
While geopolitical conflicts pose some upward price risk, traders are also facing a weak fundamentals outlook for 2025.
West Texas Intermediate could average $65 a barrel next year, with a downside of under $50 a barrel if the Organization of the Petroleum Exporting Countries and allies (OPEC+) increase production next year, Tudor, Pickering, Holt & Co analyst Matt Portillo said in a note last month.
"The market is addressing the supply and generally sluggish demand balance," said Peter Keavey, global head of energy at CME Group. "(Investors are) really turning to the options markets to hedge," he said, citing the sharp 38% year-on-year jump in average daily volumes of WTI crude oil monthly options traded on the CME last month.
U.S. shale producer Coterra Energy CTRA.N, which has not hedged a significant portion of its production through the end of this year and next, said it added new derivative contracts in October in its third quarter earnings report.
The company added an additional 305,000 barrels of WTI oil hedges for the fourth quarter of 2024, on top of the 3.68 million barrels it already held. It added another 4.205 million barrels of WTI oil hedges for the remainder of 2025.
Uncertainty around when OPEC+ would unwind its most recent layer of output curbs, a cut of 2.2 million bpd, further stoked producers' concerns last month and helped buoy hedging activity.
"The outlook has turned sourer for 2025, with projected oversupply," Aegis' Stevens said.
OPEC+ ultimately agreed to delay its planned December oil output increase by one month, the group said on Sunday, as weak demand notably from China and rising supply outside the group maintain downward pressure on the oil market.
Reporting by Georgina McCartney in Houston; Editing by Christopher Cushing
ताजातरीन समाचार
अस्वीकरण: XM Group के सत्व केवल निष्पादन वाली सेवा और हमारी ऑनलाइन व्यापार सुविधा में पहुँच प्रदान करते हैं, ताकि व्यक्ति वेबसाइट पर या उसके जरिए उपलब्ध सामग्री को देख सके और/या उसका उपयोग कर सके। इसका प्रयोजन इसे बदलना या विस्तार देना नहीं है, न ही वह इसे बदलता या विस्तार देता है। इस तरह की पहुँच हमेशा ही निम्नलिखित के अधीन रहेगी: (1) नियम और शर्तें; (2) जोखिम चेतावनियाँ; और (3) पूर्ण अस्वीकरण। इसलिए ऐसी जानकारी सामान्य सूचना से अधिक कुछ भी नहीं है। विशेष रूप से, कृपया इससे अवगत रहें कि हमारी ऑनलाइन व्यापार सुविधा की सामग्रियाँ न तो किसी चीज का अनुरोध करती हैं, न ही वित्तीय बाजारों में प्रवेश करने की पेशकश ही करती हैं। किसी भी वित्तीय बाजार में व्यापार करने के साथ आपकी पूँजी को उल्लेखनीय जोखिम है।
हमारी ऑनलाइन व्यापार सुविधा में प्रकाशित सभी सामग्रियाँ शैक्षणिक/सूचनात्मक प्रयोजनों मात्र के लिए हैं, और इनमें वित्तीय, निवेश टैक्स या व्यापार सलाह और सुझाव नहीं हैं - न ही ऐसा समझना चाहिए कि इनमें ये सब हैं; न ही इनमें हमारी व्यापार कीमतों का अभिलेख है; न ही इनमें किसी वित्तीय उपकरण में लेन-देन करने का निमंत्रण या अनुरोध है; न ही ये आपको अवांछित वित्तयी प्रोमोशन पेश करती हैं।
इस वेबसाइट में मौजूद कोई भी तृतीय पक्षीय सामग्री, तथा XM द्वारा तैयार की गई सामग्रियाँ, जैसे: अभिप्राय, समाचार, अनुसंधान, विश्लेषण, कीमतें और अन्य सूचनाएँ या तृतीय पक्षों की साइटों के लिंक, "जैसा-है-वैसा" के आधार पर बाजार के बारे में सामान्य टिप्पणी के रूप में उपलब्ध कराई गई हैं, और वे निवेश हेतु सलाह नहीं हैं। जिस हद तक कीसी सामग्री को निवेश अनुसंधान मान लिया जाता है, उस हद तक आपको ध्यान में रखना होगा और इसे स्वीकार करना होगा कि वह सामग्री इस उद्देश्य से और निवेश अनुसंधान की स्वतंत्रता को बढ़ावा देने के लिए कानूनी आवश्यकताओं के मुताबिक, तैयार नहीं की गई है, और इसलिए उसे प्रासंगिक कानूनों और विनियमों के तहत विपणन संप्रेषण माना जाएगा। कृपया सुनिश्चित करें कि आपने गैर-आश्रित निवेश के बारे में हमारी सूचना को पढ़ और समझ लिया है। पीछे दी गई जानकारी के बारे में अनुसंधान और जोखिम चेतावनी यहाँ उपलब्ध है।
