Traders jumped into options on oil as it hit its highest level since 2008, with some even placing low-cost bets on futures exceeding $200 before the end of March.
The market assessed the risk of a supply cut-off from Russia, one of the world’s largest exporters, and prices to buy call options at higher prices soared Monday. According to ICE Futures Europe statistics, around 1,200 contracts for the option to buy May Brent futures at $200 a barrel traded on Monday. The options will expire three days before the deal settles on March 28. The cost of purchasing them has risen by 152 percent to $2.39 per barrel.
According to ICE, the cost of a $150-a-barrel call option for the June Brent contract has doubled since Friday, while the cost of $180 call options has increased by 110 percent. Early on Monday, the front-month May contract for Brent soared sharply as traders worried about reports of a Russian crude ban in the wake of Libyan supply disruptions and delays in expected progress in Iran nuclear talks.
Last week, JPMorgan Chase & Co predicted that if Russian supplies continue to be disrupted, Brent crude could end the year at $185 a barrel, while Australia & New Zealand Banking Group Ltd. estimated that new sanctions would disrupt around 5 million barrels per day of pipeline and seaborne oil supplies.
READ: What a Russian Oil Ban Could Mean for an Already Unstable Market
After the United States and Saudi Arabia, Russia is the world’s third-largest oil production. According to the International Energy Agency, the OPEC+ member exported 7.8 million barrels per day of crude, condensate, and oil products in December last year, delivering critical fuels including diesel, fuel oil, vacuum gasoil, and naphtha to consumers in Europe, the United States, and Asia.
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