Traders place large USD950m bet on oil price falling hours ahead of ceasefire

LONDON: Investors placed an approximately USD950 million bet on oil prices falling just hours before the US 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 President Donald Trump.

On Tuesday, investors sold a combined 8,600 lots of Brent and US 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 percent to below USD100 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 percent drop in the crude price.