Oil may repeat stock market rise

Brent crude oil prices on Monday surpassed $63 per barrel for the first time since January 2020. Growth since the beginning of the month is more than 15%. Oil is becoming more expensive, supported by a number of factors, but above all by reducing the risk of demand for raw materials from coronavirus.

” Bets on accelerating economic activity are pushing oil prices upwards. The fall in the US currency against a backdrop of market optimism is one of the best mixes for higher oil prices,” fxPro analysts said. According to Bloomberg, u.S. oil demand has increased as refineries increase refining volumes, expecting stimulus measures to support economic recovery and fuel demand. The introduction of coronavirus vaccinations around the world, as well as the decrease in the incidence of diseases, continue to push oil prices to new highs.

Strong open interest in Brent oil talk options creates preconditions for gamma radiation, which contributed to the growth of the U.S. stock market in the summer of 2020, writes ProFinance, citing Bloomberg.

Traders note that the current volume of open positions in “around money” options is clearly high by historical standards. This creates the prospect of a “gamma-squabble” similar to what was observed on the U.S. stock market in the summer-autumn. All this increases the attractiveness of the oil market in the eyes of asset managers, who since the beginning of this year have invested about $6 billion in the purchase of futures contracts and options to buy on Brent. Last summer, major players aggressively bought out-of-money buying options on shares of leading technology companies such as FAANMG (Facebook, Apple, Amazon, Netflix, Microsoft and Google) and thus forced sellers (dealers) to hedge the risks associated with buying underlying assets by pushing it up. Citigroup forecasts Brent crude to reach $70 within 6-12 months and WTI at $68. The decline in supply-to-demand is reflected in physical markets with increased structural backwordification that “encourages additional financial impact on oil.” 

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