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When some options traders bet in September 2021 that oil could reach $200 a barrel oil by the end of this year, those headlines were mostly in the “oddly enough” category. Now that prices hit $130 early on Monday, $200 oil by the end of March is not so unthinkable, as even major investment banks predict that a Russian oil ban would easily send prices to $150 and possibly to $200.
And now options traders have significantly increased bets that oil could hit $200 as early as this month. Traders would profit from those call options if oil prices were to rally to those levels.
According to ICE Futures Europe data compiled by Bloomberg, more than 1,200 contracts were traded on Monday for the option to buy Brent Crude future for May at $200 per barrel. As a result of active options trading in recent days, the price to buy such options has skyrocketed. For example, the $200 oil options on the May Brent futures – expiring on March 28, three days before the contract expires—saw the price for buying them surge by 152 percent to $2.39 a barrel. The price of the $150 a barrel June call option doubled, and the $180 call options surged by 110 percent, per the exchange data cited by Bloomberg.
Early on Monday, Brent surged to $130 a barrel at the start of trade amid talks of a Russian oil ban in the U.S. and European allies and a stalemate in the negotiations for reviving the so-called Iranian nuclear deal.
Bank of America says that if most of Russia’s oil exports were stopped, the market would find itself in at least a 5-million-bpd deficit, which could trigger an oil price move to $200 per barrel.
If Russian oil supply continues to be disrupted, Brent could end this year at $185 per barrel, JPMorgan analysts wrote in a note last week.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.