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Traders may trigger a decline in bait recession crude oil

  • The risks of recession caused oil prices to fall in June, with Brent crude falling 7.8%.
  • A growing number of commodities traders are betting that prices will still fall by 25% by December.
  • One barrel of crude oil fell $ 139 to $ 39 during the Great Depression of 2008.

There have been fears that oil prices are heading towards their first monthly loss since last November


And the destruction of demand has hit the sentiment, and the options market is showing that a growing number of investors are becoming more bearish.

The factors that pushed oil to its peak of more than $ 140 a barrel a few weeks ago – thanks to rising demand and a massive deficit in supply thanks to Russian sanctions on the war in Ukraine – are starting to change.

Sky-high inflation is pushing central banks around the world to raise interest rates, which could hit commodity demand and the likelihood of a recession.

Recessions often bring about a drop in oil prices, consumer spending declines, and fuel demand slows. The price of a barrel of crude oil fell from $ 139 to $ 39 a year after the 2008 financial crisis.

While oil has risen to about $ 140 a barrel since Russia invaded Ukraine in February, Brent fell 7.8% to $ 107 a barrel this month because investors were worried about the recession.

“It is concerned about the economic downturn and its potential negative impact on demand [are ripping] Through periodic commodities such as oil, ”said Saxo Bank technicians.

The derivatives market shows that investors are joining to put options – it gives owners the right, but not the obligation, to buy a particular property at a fixed price on a given date.

The SPDR Energy Select ETF (XLE), backed by some large US energy companies, is one of the standout stock-market performers this year, with a gain of 33%, and a 12% loss on the S&P 500, thanks to rising oil prices. But investor interest reflects the creeping bearishness in the sector.

According to the New York Stock Exchange, the total holdings of putts on XLE reached a record 2.02 million lots, and more dramatically, trading in those options increased this month.

Bloomberg’s data shows that daily trading volume on XLE reached a peak of 839,000 lats on June 17th. On Wednesday, that volume retreated to 212,257 lots, but it exceeds the 20-day average of 190,000 lots – the highest on record.

According to Wall Street banks Morgan Stanley and Wells Fargo, the Federal Reserve’s 75 basis point increase last week boosted the odds of a recession. Analysts say this has made commodities significantly more disgusting.

“Growing fears of a recession weigh on risk assets and comments [Fed chair] Jerome Powell… was not helping, ”Warren Patterson, head of ING’s Commodities Strategy, said in reference to Powell’s recent congressional testimony.

Some investors also see oil prices drop another 25% by the end of the year.

Brent crude futures options – the global benchmark price – traders are starting to increase their bets, as today’s price does not last until the end of the year at about $ 100 a barrel, as rising interest rates slow the demand for anything from crude oil to jet fuel to gasoline.

Brent Futures is now the second most popular option for Brent Futures, which expires in December, and now has the right to sell for $ 85 to $ 85 a barrel, based on data from the Intercontinental Exchange.

Holdings, also known as open interest, has grown to about 21,795 lots at $ 85 a month, up from 19,360 lots just a month ago. Meanwhile, investors are building holdings at $ 75, which marks a roughly 25% drop from the current level, and open interest has grown to 15,568 lots from 15,684 a month ago.

December’s most popular option is still $ 120 per barrel, but only. At 23,806 lots, it is neck and neck with plenty of bear putts holding.

Read more: UBS: Risks of a Recession Are Increasing – But Make These 6 Investments to Protect Your Capital from a Recession

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