Oil Traders Are Reportedly Cutting Back On Long-Term Bets As Iran, Ukraine Wars Rage, Morgan Stanley Says – ‘People Have Been More Precise With Their Risk’

According to a Bloomberg report, Morgan Stanley’s co-head of global oil trading, Brendan Ross, said oil traders are increasingly focusing on contracts covering the next three to six months.

• The caution is making longer-dated oil contracts less liquid, Ross said.
• ‘People have been more precise with their risk,’ Ross added.
• As of Tuesday’s close, crude prices have soared more than 35% since the Middle East conflict began in February.

Geopolitical uncertainty, particularly from the conflicts in Iran and Ukraine, is reportedly pushing oil traders toward shorter-term contracts as longer-term energy prices become harder to predict, according to Morgan Stanley’s co-head of global oil trading, Brendan Ross.

According to a report by Bloomberg on Wednesday, Ross said oil traders are increasingly focusing on contracts covering the next three to six months rather than taking broader positions further along the futures market.

“People have been more precise with their risk,” Ross said at the Asia Pacific Petroleum Conference in Singapore, adding that traders are deciding more carefully which exposures they actually want.

That caution is also making longer-dated oil contracts less liquid as fewer participants trade them.

“People are really just trading the market on a front three to six month basis, and then the illiquidity feeds into more illiquidity,” he said of longer-term contracts.

Ross added that the biggest disconnect between physical supplies and financial markets has appeared in oil products, where disruptions have tightened diesel and pushed fuel prices higher.

“In terms of the physical-financial dislocation, clearly it’s been mostly in product markets,” Ross said.

Brent Crosses $100 Per Barrel, Up More Than 35% Since Middle East War Began

The shift comes after a volatile six months for crude. Brent crude settled at $72.48 per barrel on February 27, the final trading day before the U.S.-Israeli strikes on Iran war began. As of Tuesday’s close, the prices have jumped more than 35%.

Brent extended its rally on Wednesday, pushing above $100 per barrel for the first time since July 24. At the time of writing, Brent futures for November deliveries were up 2.6% at $100.8 per barrel. West Texas Intermediate (WTI) futures were up 2.3% at $95.13 per barrel.

Houthi Attacks Add Pressure

Earlier this week, Iran-backed Houthis targeted Saudi energy facilities, raising fresh concerns about oil shipments through the Red Sea, a key alternative to the Strait of Hormuz.

“Market participants ​appear to be pricing in a more prolonged conflict in the Middle East as well as the risk that ​the latest escalation in military strikes disrupts oil flows from the Middle East,” Hamad Hussain, senior climate and commodities economist at ‌Capital Economics, told Reuters.

Market Tracker

U.S. equities were down in pre-market trading. The SPDR S&P 500 ETF (SPY) fell 0.26%, while the SPDR Dow Jones Industrial Average ETF Trust (DIA) and the Invesco QQQ Trust ETF (QQQ) declined around 0.4% each. Retail sentiment surrounding SPY and QQQ was ‘bullish,’ and ‘bearish’ for DIA.

Meanwhile, the United States Oil Fund (USO) was up 1.5%, while the ProShares Ultra Bloomberg Crude Oil (UCO) gained 2.4%%.

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