Constructive talks between the US and Iran regarding nuclear issues are currently impacting oil prices. However, uncertainty is keeping a risk premium in Brent crude oil. We’re seeing a rise in speculative net longs in ICE Brent, along with a bullish volatility skew.
Upcoming reports from the EIA, OPEC, and IEA may cause further changes in both Crude Oil and Brent benchmarks. Oil prices fell in early Asian trading after a positive outlook on these talks emerged.
This ongoing uncertainty prompts the market to consider a risk premium. Participants in the options market are preparing for a possible price increase, as shown by the bullish volatility skew in Brent.
Speculators are cautious about short-selling oil due to this existing uncertainty. Journalists report on expert market observations and insights from both internal and external analysts to capture this landscape.
This week, oil prices are softening as reports from Vienna suggest progress in US-Iran nuclear discussions. A potential deal could add over a million barrels per day back into the market, a significant bearish factor. Still, this downward pressure is met with a built-in risk premium in current Brent prices.
This nervousness is understandable, especially after last week’s EIA report, which revealed an unexpected crude draw of 2.1 million barrels, contrary to expectations of an increase. This follows the OPEC+ Joint Ministerial Monitoring Committee’s recommendation to maintain current production quotas through March, due to a fragile demand recovery in parts of Asia. These supply issues keep sellers cautious.
In the derivatives market, the tension is evident in recent positioning data, showing speculative net longs in ICE Brent have risen to a three-month high. The options market indicates a similar trend, with a pronounced bullish volatility skew, meaning traders are paying more for call options than for puts. This suggests they are more concerned about a sudden price spike than a gradual drop from a potential Iran deal.
Reflecting on the sharp price rally in the fourth quarter of 2025, when geopolitical tensions in the Strait of Hormuz increased, it’s clear why few want to short oil. In the coming weeks, this environment may favor strategies that take advantage of upward-moving volatility, such as bull call spreads. This strategy allows participation in a potential rally while defining risk in case the Iran news leads to a sudden price drop.
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