With falling oil prices, betting on an oversupply of oil has once again become the focus.

After the US and Iran reached a peace agreement, the price of crude oil futures plummeted significantly, bringing back into focus a batch of over-the-counter options positions that had almost been forgotten by the market, betting on an oversupply of oil. Before the US struck Iran, some traders had bet that an oversupply of crude oil would lead to the near-term contract prices being lower than the forward contract prices, creating a so-called "contango" market structure. However, after the US-Iran conflict erupted, the market feared shortages and near-month prices surged. In late April, the August WTI crude oil contract price was more than $5 higher per barrel than the September contract, and the September contract was $4 higher than the October contract. This rally made over 20,000 put option positions, settled in cash, almost worthless. Now, as the spread between contracts narrows back to under $1 per barrel, these options have regained some value. As oil prices fall back to pre-war levels, not only are bearish spread positions coming back into focus, but the entire market's positioning is becoming more bearish. The latest weekly data from the US Commodity Futures Trading Commission shows that net long positions held by hedge funds and other large speculators in the international benchmark Brent crude oil have dropped to the lowest level in six months, decreasing by almost three-quarters since the end of March.