(Bloomberg) — Until recently, oil traders complained that it was almost impossible to wring profits out of a listless and rangebound crude market. After the events of the past two-and-a-half weeks, this may have been a case of “careful what you wish for.”
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In that brief period, the oil market went from flatlining to experiencing huge price moves. The trigger was US President Donald Trump’s April 2 unveiling of sweeping tariffs, escalating a trade war. Less than a day later, OPEC+ stunned markets with plans to boost output at a faster-than-anticipated rate. The dual shocks sent US crude futures down almost 7% for the biggest decline since Russia’s invasion of Ukraine, while a key gauge of volatility rocketed to a six-month high.
But traders say the turbulence that has since gripped the market is proving equally hard to make money from, with contradictory, rapid-fire developments unpredictably buffeting prices.
“It’s not the kind of volatility you can have a medium-term view on, because it changes day to day,” said George Cultraro, global head of commodities at Bank of America Corp. “A 25% tariff can turn into a 10% or 5% or 2% tariff, or get put off altogether. It has made pricing and managing risk a bit more difficult.”
Brent Belote, chief investment officer of Cayler Capital, was among the traders who earlier this year had been pining for a rebound in volatility. Market conditions had even pushed him to hunt for profits in other commodities markets for the first time in his career, including by starting a metals trading arm.
The sudden turbulence caught him off-guard, resulting in losses on some bets.
“Well, I stepped in it,” Belote said in a note to clients. “Not a little misstep, not an ‘Oops, missed by a hair’ call, this was me running full speed into a brick wall. I genuinely believed Trump’s new round of tariff talk would be modest.”
The resurgence in volatility, while providing a short-term boost in trading volumes, threatens the market’s liquidity over the longer term.
Investors pulling out of crude and fuel markets triggered a $2 billion net outflow in the week ending April 11, JPMorgan Chase & Co. analyst Tracey Allen wrote in a note to clients. Volumes across the futures curve have retreated to late March levels and WTI’s open interest is fading after the initial spike as investors bail rather than test their luck predicting Trump’s next tariff salvo.
