Polymarket and other prediction platforms driving oil market, traders say
Online betting platforms are directly driving the global oil market as they increasingly rely on anonymous prediction markets to determine multimillion-dollar trades, energy traders have warned.Market experts have said that datafeeds from prediction platforms such as Polymarket are being used to create the algorithms that influence trading in the global Brent crude futures market.The “widespread” use of Polymarket in oil futures trading has emerged amid concerns that anonymous account holders may be using insider knowledge to place bets.Energy traders have raised concerns that the platform could also be used to influence pricing in the global oil market.One energy trader said Polymarket had become the best predictor of the oil market’s direction since the US-Israel war with Iran triggered a global oil crisis, making it an essential part of the algorithms used to determine trades.
“We’ve seen very large bets going on minutes before a major announcement comes up.The speculation is that someone on the inside has loaded up their crypto account to make some quick money on a bet,” the trader said.The growing influence of Polymarket on oil pricing means betting by a relatively small number of anonymous users can play an outsized role in influencing the oil market – where far larger financial windfalls are possible, they added.Ajay Parmar, the head of oil trading at ICIS, a market intelligence agency, said the betting platform was “having an increased impact on many markets now” and this would “increasingly become the case going forward”.“Betting markets do have a long history of strong prediction accuracy and since Polymarket is in the ascendancy, traders are indeed increasingly turning to it for market indicators,” Parmar said.
Tim Skirrow, a longtime oil trader and the head of derivatives at the market intelligence firm Energy Aspects, also confirmed the adoption of prediction markets as a trading tool.“I can believe it,” he said.“Any and all data is up for consideration in modern markets.If it has alpha then it has alpha.”Online betting platforms including Polymarket allow anonymous individuals to wager on the outcomes of a wide range of real-world events – from sport and the weather to developments in the Iran war – using online cryptocurrency accounts.
Unlike bookmakers, exchanges and prediction markets pit customers against one another.The US investment bank Goldman Sachs, one of the most influential forecasters of global oil prices, has included analysis of prediction-market data in the oil market research it shares with investors and clients to help shape their trading strategy.In addition, the most important exchange for the trade of Brent crude futures, the Intercontinental Exchange (ICE), has launched a trading tool that provides a data feed of Polymarket’s prediction markets to help traders “consume crowdsourced probability assessments” as “market signals”.Energy market traders have said that the deepening ties between prediction platforms and the global oil market could amplify the impact of insider betting on global markets, or even incentivise betting behaviour which specifically seeks to influence wider energy commodity markets.In some instances, a small number of Polymarket users made substantial bets in the run-up to the US-Israel war in Iran, and in the weeks that have followed, that experts say appears to show signs of insider knowledge.
This data is used to inform algorithmic trading systems that in the past have focused on data from news organisations and social media to create price signals for market trading.In some cases these bets appear to have triggered a high volume of trade in the oil futures market, causing sharp price fluctuations that could net a windfall for an individual with a position in the market.ICE launched its Polymarket data tool just weeks before the Iran war began.The owner of the New York Stock Exchange agreed to invest $2bn (£1.5bn) in Polymarket in October last year in a deal that valued the platform at about $9bn.
It said it had injected $600m into the platform in recent weeks.However, not all commodity traders are convinced by Polymarket’s track record in predicting the next market-moving event.“Polymarket has absolutely made bad calls during this crisis,” said one trading analyst at a leading energy company.“I imagine this is something that the hedge funds are interested in, but that’s not how we make decisions here.”Polymarket and ICE were contacted for comment.
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