Hedge funds are increasingly optimistic about oil's short-term price outlook as tightening U.S. sanctions on Russia and Iran, coupled with geopolitical tensions in the Middle East, threaten to create a supply crunch. The delay in OPEC+ unwinding production cuts further exacerbates potential disruptions, supporting expectations for higher oil prices. Analysts note a less-negative WTI risk reversal and an upward shift in the forward curve, indicating a more bullish sentiment in the options market and a positive outlook on crude's supply-demand dynamics.
The rising CFTC speculative net long futures position underscores this bullish sentiment, as hedge funds anticipate higher oil prices in the first quarter. The WTI crude's 1-month 25-delta risk reversal increased to 1.04 on January 10, up from minus 3.1 in early December, reflecting increased demand for call options over puts.
As of 22:43 on January 15, the price of Brent crude oil (CO1) stands at $82.27, slightly up from its last close of $82.03, amid these evolving market dynamics.