Bearish oil traders scarred by past geopolitical price spikes are increasingly favouring safer ways to position for a looming glut.With the fresh uncertainty surrounding Russian supply, traders are shifting toward spreads, the price differences between two futures contracts, and options, which grant the holder the right but not the obligation to buy or sell oil at a set price. Those relatively less risky strategies compared to wagering on outright futures allow traders to bet on lower prices en route to a widely telegraphed oversupply of crude next year.They also serve to limit losses in the event new sanctions against Moscow, a major oil producer, prove more disruptive than feared.The activity highlights a tug-of-war between the competing narratives.There’s supply risk in oil-rich countries from Russia to Venezuela, where the political regime has met the ire of the Trump administration. Yet traders remain captivated by growing supply from both outside and within the Opec+ alliance, with the International Energy Agency predicting a record surplus for 2026. Over 1bn barrels are currently sailing across the world’s oceans with many looking for homes.“We’re stuck in a holding pattern,” said Rebecca Babin of CIBC Private Wealth said. “This isn’t a market without risk — it’s a market without clarity or conviction.”Some of the largest holdings in one-month calendar spread options, a niche type of option contract used for expressing views on over or under-supply, are on weaker near-term spreads. The cost of buying bearish put options has risen over the past few days, a sign of increasing expectations for a price drop amid ongoing peace talks between Ukraine and Russia. Even so, open interest in calls and puts has remained roughly balanced across both Brent and WTI, reflecting a market that’s hedging in both directions.Read More: US Warship Cuts Path of Russian Tanker Headed to VenezuelaThe conflicting pulls are causing an industry-wide sense of déjà vu: past geopolitical shocks, such the Israel-Iran war in June, drove prices up without actually reducing supply and punished those with outright bearish bets.“We don’t need to predict the next $10 move in crude,” Cayler Capital, an oil-focused commodity trading adviser run by Brent Belote, wrote in a letter to investors seen by Bloomberg. “We need to survive the next $3 fake-out and capture the $1.50 dislocation no one else wants to trade.”In another part of the letter, Belote categorises fundamentals as “fine” and sentiment as “confused.”Wagers are growing in one-month calendar spread contracts at levels from -$0.25 to -$1 a barrel per month. The sentiment isn’t overwhelmingly bearish, though, with sizeable open interest at $0.75, which would profit from a return to tighter supply conditions. The premium that front-month WTI futures command over the next contract, known as the prompt spread, is currently trading at 22 cents.WTI calendar spread option open interest by strike, as of November 24That hasn’t eliminated the need for cautious positioning amid mounting evidence that the latest batch of US sanctions against Russian oil giants Rosneft PJSC and Lukoil PJSC are rewiring trade flows: Moscow’s oil sold at the cheapest level in over two-and-a-half years last week, and even that discount wasn’t enough to win back Asian buyers.Options markets are “pricing a quieter 2026 but maintaining a risk premium for episodic spikes,” JPMorgan analysts, including head of commodities research Natasha Kaneva, wrote in a note.The bank expects a “very gradual drift lower” in prices and recommends Brent put spreads and ratio put spreads.
