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Oil Traders Hedge Geopolitical Risk With Record Options


1. Venezuela Braces for Impact After US Reimposes Sanctions

-  The Biden administration reimposed sanctions on Venezuela’s oil industry after its six-month waiver expired on 18 April, with the White House providing oil firms with a 45-day grace period to wind down operations.

- The US waiver was linked to President Maduro’s agreement to hold a free and fair presidential election in July and to allow opposition politicians to participate, but both Maria Corina Machado and her proxy replacement Corina Yoris were barred from running.

- Thanks to the temporary respite in sanctions, Venezuela’s state oil firm PDVSA ramped up production by some 150,000 b/d, with oil production last month rising above 870,000 b/d.

- Heavy sour might come under pressure in Latin America, though the Biden administration hinted at a potential reinstatement of the waiver in case Maduro allows opposition candidates to run.

2. Traders Hedge Geopolitical Risks with Record Options

- Oil prices have slid lower this week with ICE Brent shedding some $3 per barrel and moving within the $88-89 per barrel range, but the oil market’s interest is increasingly geared towards options.

- Call options are currently trading at their widest premium to bearish put options since October, with the call skew some 5% above puts, as traders start to hedge their exposure against price rallies.

- The volume of options trading is surpassing record levels, with last…

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