Tensions in the Middle East have continued to rise over the past week, and the crude oil market has reacted swiftly. Brent crude oil rose to $101.09 per barrel on Wednesday, an increase of 3.2% for the day, marking its first return above $100 in six weeks; WTI crude oil was reported at $96.27. As spot prices climbed, bullish bets on the oil market also increased significantly.
Conflicts escalate, driving up oil prices
The direct background for this round of increases is the continuous escalation of events related to Saudi Arabia and Iran over a short period of time. Saudi officials stated that Houthi militants attacked Saudi oil facilities early on Tuesday morning, resulting in 73 injuries. Meanwhile, on the same day, the US Central Command destroyed five Iranian oil tankers, following an attack on another three oil tankers on Saturday, as a response to Iran's ballistic missile strike on an American warship.
After geopolitical risks rose, the market began to re-evaluate the possibility of disruptions to crude oil supply. The break of oil prices above the integer mark also strengthened the bullish sentiment in the short term.
Predict a bullish market turn
In a crude oil contract under Myriad, the market is betting on whether crude oil will reach $120 first or fall to $55 first. Currently, the probability of reaching $120 has risen to 56.5%, an increase of 15.1 percentage points from before. Since the beginning of September, the bullish side has surpassed the $55 side and has not fallen back since then. The cumulative trading volume in this market since March is approximately 12.7 million US dollars.
The target price contract for September on WTI on Polymarket has also been revised upwards accordingly:
- WTI The probability of reaching $100 this month has risen to 59%
- The probability of reaching $105 has risen to 30%.
- The probability of reaching $90 has risen to 71%.
In contrast, positions betting on a decline in oil prices have significantly cooled down.
The probability of a decline target has significantly decreased.
On Polymarket, the probability of WTI falling to $85 this month has decreased by 33 percentage points to 39%, and the probability of lower prices has generally dropped to single digits. As for the extreme downward target of $55, in the September contracts of Polymarket, only 1% remains.
However, the contract designs of the two platforms are not the same. The issue with Myriad is that there is no fixed deadline for when crude oil will ultimately reach which target price; Polymarket limits it to whether the relevant price level will be reached by the end of September. Therefore, the probabilities provided by both sides cannot be directly compared side by side.
Fuel prices are rising in tandem.
Rising oil prices have also begun to affect the retail market. On Wednesday, the average price of diesel in the United States rose to $5.94 per gallon, setting a new record; the average price of gasoline was $4.22 per gallon. Continuing increases in fuel costs mean that energy prices may once again become an important economic issue ahead of the mid-term elections in the United States.
