Brent Crude Tops $100 as Oil Traders Pull Back From Long-Term Bets, Morgan Stanley Says

Brent crude crossed $100 a barrel on Wednesday, September 9, its first close above that level since July 24. Futures for November delivery were up 2.6% at $100.80 during the session, while West Texas Intermediate rose 2.3% to $95.13, according to TradingView.

The move caps a run of more than 35% since Brent settled at $72.48 on February 27, the last trading day before U.S. and Israeli strikes on Iran began, TradingView reported.

Traders Stop Guessing Past Six Months

Speaking at the Asia Pacific Petroleum Conference in Singapore on Wednesday, Morgan Stanley's co-head of global oil trading, Brendan Ross, said the wars in Iran and Ukraine have pushed traders out of longer-dated futures entirely, according to Bloomberg's reporting carried by ZeroHedge and TradingView.

"People have been more precise with their risk," Ross said. "They've decided what they really want and what's an unexpected bleed."

Most traders are now confining bets to a three-to-six-month window instead of taking broader positions further out the curve, Ross said. "People are really just trading the market on a front three to six month basis, and then the illiquidity feeds into more illiquidity," he said, describing how the retreat from long-dated contracts is thinning liquidity further and making those contracts even less attractive to trade.

Ross said the sharpest gap between what's happening in the physical market and what's priced into financial contracts is showing up in fuel products, not crude itself. "In terms of the physical-financial dislocation, clearly it's been mostly in product markets," he said.

That's showing up in positioning data. Hedge funds have swung from net short on gasoline and diesel early this spring to a net long position of 177 million barrels across those two contracts as of September 1, according to energy analyst John Kemp's exchange data, cited by ZeroHedge.

Supply Side Squeeze

Morgan Stanley commodities strategist Martijn Rats forecast last week that Brent will average $100 in the fourth quarter, according to Benzinga. Rats said oil held at sea has fallen roughly 190 million barrels since mid-July, with onshore global crude inventories down another 38 million barrels over the same stretch.

Vitol CEO Russell Hardy told Benzinga the bigger squeeze is in refined fuels rather than crude, since refiners can't stop fuel inventories from falling. Stockpiles, he said, are now "pretty much at the bottom."

Earlier in the week, Iran-backed Houthis targeted Saudi energy facilities, raising fresh concern about shipping through the Red Sea, a route that matters more when the Strait of Hormuz is under threat, Benzinga reported. Hamad Hussain, senior climate and commodities economist at Capital Economics, told Reuters that markets "appear to be pricing in a more prolonged conflict in the Middle East as well as the risk that the latest escalation in military strikes disrupts oil flows."

Wall Street's Bigger Worry: What $100 Oil Does to Stocks

Morgan Stanley's chief U.S. equity strategist, Mike Wilson, separately warned that higher oil and higher interest rates remain the main near-term risks to the stock market, according to Benzinga, noting that the U.S. Strategic Petroleum Reserve has already been substantially drawn down as a shock absorber. Goldman Sachs estimates every $10 rise in crude adds roughly 0.2 percentage points to headline inflation.

Energy stocks have ridden the rally. Exxon Mobil is up about 33% this year through Tuesday and Chevron roughly 38%, Benzinga reported. Broader indexes moved the other way Wednesday morning: the S&P 500 ETF (SPY) fell 0.26% and the Dow (DIA) and Nasdaq (QQQ) trackers each dropped around 0.4% in pre-market trading, while the United States Oil Fund (USO) climbed 1.5%.

The Bet on De-Escalation Doesn't Match the Bet on Supply

Prediction-market traders on Polymarket put a 74% chance that U.S.-Iran fighting pauses by September 30, counting a ceasefire as two straight weeks without qualifying U.S. military action against Iran, Benzinga reported. That's a reasonable case for lower prices soon. A ceasefire would remove the single biggest driver of the current spike.

But the same traders give just a 2% chance that Strait of Hormuz traffic returns to normal this month, on a market with more than $8 million traded, and put 60% odds that IMF PortWatch records zero ships transiting Hormuz on at least one day before October 31. Even people betting heavily on a ceasefire don't think oil actually starts flowing normally again anytime soon.

That leaves Ross's traders exactly where they started. They're unwilling to price six months out because a ceasefire and a supply recovery may not arrive on the same calendar, if either arrives at all.