Reza Delmaghni mostly trades stocks, but he has been moving in and out of the oil market over the past week, weighed down by the biggest weekly rise in crude oil in nearly two years.
“Since we got to $67, the price has been rising steadily and quite orderly,” said Dalmaghani, a Phoenix-based day trader who tries to profit from the market’s short-term trend. “When it’s organized, it’s great.”
He’s not the only “oil tourist” flocking to the market as war risks send futures soaring. With the Iranian attack on Israel causing oil prices to rise by more than $6 per barrel last week, retail investors are turning to buying oil-related products.
It reads: Oil prices rise after the Iranian strike on Israel
Trading volumes in the U.S. Oil Fund — the largest exchange-traded product that tracks the price of oil — rose this week to their highest levels since Russia’s invasion of Ukraine in 2022.
Likewise, CME Group’s WTI futures contracts – which are traded on retail investments Locations – Recorded the highest daily volume since January this week. The company’s weekly options, which traders use to hedge short-term price risks, saw open interest jump to a record high of about 80,000 contracts this week.
While this brings much-needed liquidity to a futures market that has sidelined trading players, it also threatens to fuel more volatility.
Opportunistic traders who quickly enter and exit the market during major global events have had a significant impact on oil prices in recent years. In 2020, demand concerns drove prices down significantly Incursion From retail investors in the market Contribute US oil turned negative for a short period.
The jump in USO volumes this week “coincided with higher-than-normal volatility in crude oil prices,” said John Love, CEO of USCF Investments, which manages the USO.
One measure of volatility jumped this week to the highest level in two years.
This creates risks for traditional traders. The influx of retail investors into the market against the backdrop of escalating geopolitical tensions is helping to boost prices higher than warranted by fundamentals. If the conflict in the Middle East doesn’t actually impact crude oil supplies, the market could decline, according to Scott Shelton, an energy specialist at TC ICAP.
It reads: The threat of war in the Middle East highlights the quiet return of Iranian oil
This doesn’t worry Dalmaghani, for one simple reason: “I don’t store anything overnight.”