- Oil prices continued to rise Tuesday on optimism that the new covid variant may not be as severe as feared
- West Texas Intermediate traded near $72/Bbl this morning, up from last week’s intraday low near $62/Bbl
- Citibank on Tuesday said it is bullish prices in the short-term, and Saudi Arabia’s move on Sunday to increase the price of its crude for January gave the market confidence that the consumption outlook would remain robust (Bloomberg)
- The selloff in oil prices was negative gamma in a low liquidity market (Goldman, Bloomberg)
- The plunge in oil prices “pushed cal 2022 WTI between $65 and $60, a region containing the strike prices of many of the put options sold by producers to hedge their oil price risk,” Goldman’s Jeff Currie wrote in a note December 3
- “While the catalyst for the selloff was fundamental, the scale and shape of moves in the crude futures curves implies technical factors were also at play”
- The so-called negative gamma effects are where options traders are forced to sell futures contracts to hedge their risk (Bloomberg)