Oil prices have plunged on on reports that the US and Iran are nearing a peace deal, a development that paid off big for traders that happened to be shorting crude just ahead of the news.
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Data flagged by the The Kobeissi Letter shows that nearly $1 billion of crude oil shorts were opened roughly an hour before an Axios report that the US and Iran were nearing a deal to end the war.
The Kobeissi Letter outlined its analysis in a Wednesday morning post:
“At 3:40 AM ET today, nearly 10,000 contracts worth of crude oil shorts were taken without any major news.This is equivalent to ~$920 million in notional value, an unusually large trade for 3:40 AM ET.At 4:50 AM ET, just 70 minutes later, Axios reported that the US is “close” to a “memorandum of understanding” to end the Iran War.By 7:00 AM ET, oil prices had fallen over -12% with these crude oil shorts gaining approximately +$125 million.”
Brent oil was down as much as 11.9%, while WTI oil dropped more than 13%. Around 10:20 a.m. Brent and WTI were down roughly 7% at $101.93 and $95.06, respectively.
The plunge reflects investor optimism that the war is nearing an end on the reported agreement. It would also be a windfall for anyone betting on the downward move in crude.
Former JPMorgan quant head Marko Kolanovic reacted to oil price moves on the Axios report, saying “Who knows what happens next in blatantly manipulated markets.”
Eric Nuttall, a partner and senior portfolio manager at Ninepoint Partners, commented on the analysis from The Kobeissi Letter, saying, “We continue to encourage energy investors to focus on “the day after”, as day-to-day volatility may be intentionally induced for nefarious reasons.”
The trades highlighted by market watchers online are the latest example of well-timed bets tied to developments in the war. A $950 million oil trade on April 7 and a $760 million bet a week later were put on just minutes before breaking news that moved the price of crude.
Still, as has become common during the ceasfire that’s held since early April, conflicting signals on the likelihood of a durable peace have emerged on Wednesday as markets positioned for an end to the war.
Ebrahim Rezaei, Iranian spokesperson for the National Security and Foreign Policy Commission, said that the Axios report represents “Americans’ wish list,” not the reality of negotiations.
