Oil glut bets revive as crude slumps after U.S.-Iran deal

Nearly forgotten oil options betting on a glut are back in play as crude slumps and wartime backwardation unwinds, according to Bloomberg.bloomberg
The IEA warned the market could swing from historic supply disruption to a surplus exceeding 5 million barrels per day in 2027, according to Reuters.reuters
Uncertainty persists after follow-up U.S.-Iran talks in Switzerland were canceled Friday, and oil prices rose Sunday on renewed threats of strikes.cnbc

Oil Glut Bets Revive as Crude Retreats After US-Iran Deal

A batch of nearly forgotten derivatives positions betting on an oil supply surplus are coming back into play as crude futures slump in the wake of the U.S.-Iran peace agreement, Bloomberg reported on Sunday. The options, which had been rendered nearly worthless during months of war-driven backwardation, are regaining value as inter-month price spreads collapse and the market structure shifts toward contango.bloomberg

From Crisis to Surplus

The June 17 memorandum of understanding between Washington and Tehran brought a temporary halt to a conflict that had disrupted global oil markets since late February. Under the deal, Iran agreed to reopen the Strait of Hormuz, the crucial shipping lane through which much of the world’s oil transits, while the U.S. committed to lifting its naval blockade of Iranian ports. Ships were observed making their first passages through the strait within days of the accord taking effect.fortune

Brent crude fell below $80 a barrel for the first time in more than three months following the deal, having peaked above $120 during the height of the conflict. WTI dropped to its lowest since early March. The price retreat has deflated the steep backwardation that characterized the oil curve during hostilities — WTI futures for December 2026 had traded as much as $40 below near-month contracts in April.marinelink

Bearish Positioning Grows

Hedge funds and money managers have sharply reduced their bullish oil bets. Speculators cut net-long positions on ICE Brent futures by approximately 44,000 lots in the week ending June 9, bringing net-long positions to just under 209,000 lots, according to data from ICE Futures Europe. The reduction was driven primarily by new short positions entering the market amid growing optimism about a lasting peace.indexbox

The International Energy Agency warned in its June report that the oil market could swing from one of history’s most severe supply disruptions to a surplus exceeding 5 million barrels per day in 2027, as Middle Eastern output rebounds. Global supply is projected to surge by 8 million barrels per day next year, far outstripping demand growth of just 2 million bpd.reuters

Fragile Peace, Volatile Outlook

The outlook remains uncertain. Follow-up talks in Switzerland were abruptly canceled on Friday after Vice President JD Vance declined to travel for negotiations. On Sunday, oil prices rose after Trump threatened strikes on Iran if Hezbollah continues attacking Israel, with Brent climbing as much as 2.2%. Iranian state outlets claimed Tehran had suspended talks in response to the threats, though sources indicated discussions were continuing.nytimes

PVM Oil Associates analyst Tamas Varga noted that investors now believe the disruptions that drove prices above $120 “are definitively over,” though the 60-day truce remains fragile.cnbc