KUALA LUMPUR (Oct 20): Some speculative traders are betting on the options market that oil could exceed US$100 (about RM415.20) a barrel by year end and even reach a record US$200 per barrel by the end of 2022.
In a commentary on Tuesday (Oct 19), energy portal OilPrice.com said call options give traders the right — but not the obligation — to buy assets at a certain price, the so-called strike price, by a certain date.
It said the amounts of call options at triple-digit strikes soared in recent weeks, suggesting that more speculative traders are attracted by potential quick profits from options trades, which are relatively low-cost ways to speculate on the direction of an asset.
OilPrice said that, for example, at the end of September, call options for Brent at US$200 a barrel for December 2022 traded 1,300 times in one day amid a worsening energy crunch in Europe and Asia ahead of the winter heating season in the northern hemisphere.
It said for West Texas Intermediate (WTI), the number of outstanding call options with a US$100 per barrel strike price with different expiry dates surged five times since early February 2021 to more than 141,000 contracts as of the middle of October.
Other popular call options for WTI included strikes at US$95 or US$180, according to derivatives market place CME Group’s QuikStrike data.
OilPrice said the resurgent activity with bets on US$100 or US$200 oil shows that more traders are getting into the energy market amid the global gas and coal crunch, and more of those speculators are bullish on oil prices.
Moreover, it said the “crazy” strikes and their growing number are bound to increase the volatility in the oil market in the coming weeks and months.
Still, it said US$100 oil is no longer an outrageous bet as it was at the start of this year.
The energy portal pointed out that as of early Monday, Brent was above US$85 and WTI traded at over US$83 for the highest prices since 2018 and 2014 respectively.
It said analysts and industry professionals do not rule out US$100 oil, especially if the winter turns out colder than usual.Internet Explorer Channel Network