Futures Markets Signal Higher Prices Longer
Markets also priced in higher oil for longer through futures. Six-month Brent futures rose 3.26% to $86.12 per barrel. Moves in wider markets included more positive risk sentiment and lower yields even as Brent remained above $100. A relief rally was linked to more moderate oil price moves than in recent sessions. Looking back at this time in 2025, we saw a market trying to find its footing as Brent crude stayed above $100 a barrel. While prices were high due to supply risks, an Iraq-Turkey export deal provided some relief and helped narrow the daily trading ranges. This signaled that extreme volatility was starting to ease, even as the market prepared for a longer period of elevated prices. Today, with Brent trading around $94 per barrel, the situation feels less frantic but uncertainty remains. The Cboe Crude Oil Volatility Index (OVX) is currently near 42, which is well below the peaks seen during major supply shocks but still higher than the historical average in the low 30s. This suggests that selling options to collect premium, such as covered calls against long positions or slightly bearish call spreads, could be a viable strategy to capitalize on remaining volatility expectations.Curve Structure And Relative Value Trades
Last year, the futures market showed significant backwardation, with six-month futures trading at a steep discount to the spot price, indicating an expectation that prices would fall. In contrast, the current futures curve is much flatter, with the six-month contract only a few dollars below the front-month price, suggesting the market sees prices as more stable. This environment could favor calendar spread trades, where one might sell a near-term contract and buy a longer-dated one to profit if the curve steepens. The geopolitical focus from 2025 on bypassing the Strait of Hormuz remains highly relevant. Given that roughly 20% of global oil consumption still passes through that chokepoint, any new tensions in the region could cause the price spread between Brent and Dubai-Oman crude to widen again. We should consider trades that go long Brent futures while shorting crude grades more dependent on Hormuz, as this spread offers a hedge against specific regional flare-ups. Create your live VT Markets account and start trading now.
Start trading now – Click here to create your real VT Markets account
