Investors placed an approximately US$950 million bet on oil prices falling just hours before the U.S. and Iran announced a ceasefire, the latest large wager on the direction of the world’s most traded commodity ahead of a major policy announcement by U.S. President Donald Trump.
On Tuesday, investors sold a combined 8,600 lots of Brent and U.S. crude futures at 1945 GMT, according to LSEG data.
At around 2230 GMT on Tuesday, Trump stepped back from threatening the destruction of “a whole civilization” and announced a two-week ceasefire with Iran, knocking crude futures , down by some 15 per cent to below $100 a barrel at the start of Wednesday’s official trading session.
Taking large positions on oil prices rising or falling is not unusual as traders use them to hedge large volumes of physical oil trade.
But such deals are very rarely done in big lots, as traders prefer to use sweeping orders across many exchanges and ask brokers to use algorithmic trading over many hours to execute the order to avoid impacting prices with their bets. Large orders also are seldom executed after settlement, which happens Monday to Friday at 1830 GMT.
The bet follows similar moves on March 23, when investors sold $500 million in oil futures just 15 minutes before an announcement by Trump that he would delay attacks on Iran’s energy infrastructure, which stunned markets and then triggered a 15% drop in the crude price.
In Tuesday’s trading, some 6,200 lots of Brent futures changed hands at 1945 GMT, roughly one per cent of the total volume traded in the day’s regular session, while some 2,400 lots of WTI futures traded at this time, also equal to around one per cent of that day’s regular volume.
CME Group declined to comment. ICE did not immediately respond to a Reuters request for comment.
Trading volumes and volatility have exploded since the start of the war. On average, in the three years leading up to the war, some 300,000 lots of Brent crude futures would change hands on a daily basis.
That amount has doubled in the last four weeks as daily volumes have hit record highs above 1 million lots, equal to a billion barrels of oil.
Reporting by Amanda Cooper, Alex Lawler and Ahmad Ghaddar in London; Editing by Elisa Martinuzzi, Dmitry Zhdannikov and Elaine Hardcastle
