The Intercontinental Exchange Friday reported record open interest across its oil options markets that uncoincidentally came in a week that brought the lowest benchmark crude oil numbers since December 2021.

ICE said it saw open interest of 51.1 million contracts across commodities futures and options Wednesday, up 10% since the start of the year. Open interest across energy contracts was 47 million, with particularly brisk activity in Brent futures and options, which have surged 28% to 4.98 million contracts.

Market sources said this week's broad declines in crude futures led more traders and end-users to look to hedge costs through 2023 and even into 2024.

Option contracts with crude oil strike prices between $100/bbl and $150/bbl were particularly active, reflecting the view that the March swoon could represent a generational buying opportunity.

Wednesday saw 567,731 oil option contracts traded on ICE, with Brent accounting for 513,567 of the total. That broke a record set on March 9, 2020.

European gasoil has also seen much more participation. Open interest in gasoil futures has risen 19% since the start of the year and the most recent delivery saw 308,400 metric tons delivered at expiration.

"The increase in trading activity across ICE's markets reflects the breadth of ICE's commodity benchmarks, with customers utilizing our liquidity and transparency to hedge their risk," Jeff Barbuto, the exchange's global head of oil markets, said. "The resilience of ICE Brent through the shocks the market witnessed last year, and its outperformance this year versus other oil benchmarks, shows how the market depends on its ability to reflect global fundamentals."

ICE was not the only beneficiary of increased forward interest in locking in perceived cheap energy prices. A popular exchange traded fund, the ProShares Ultra Bloomberg Crude Oil ETF, which trades under the symbol UCO on the ICE-owned NYSE Arca, saw inflows of $158 million on a single day.

The leveraged UCO ETF seeks to double the return of long positions in NYMEX West Texas Intermediate futures on a daily basis and is a favorite tool for speculators, who believe in a higher trajectory for the benchmark.

It has an alter-ego, which trades on the symbol SCO, and attempts to double the returns of short position on WTI and is popular when traders believe the market may be overheated.

Shares in UCO hit a 52-week low of $20.74 this week, but were as high as $55.69 last year when WTI briefly traded for more than $120/bbl.


--Reporting by Tom Kloza, tkloza@opisnet.com; Editing by Jeff Barber, barber@opisnet.com


(END) Dow Jones Newswires

03-17-23 1130ET