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(Bloomberg) — Oil traders are continuing to ramp up long-shot options bets that Brent crude can rally toward $95 a barrel over the coming months.
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Call options at that strike price which expire in late July have traded more than 100,000 lots since the middle of April, with open interest growing by about the same amount. It’s the equivalent of 100 million barrels, and another 5,000 contracts were bought Monday.
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Brent futures have rebounded from a four-year low reached in early April, and are continuing to climb after a trade detente between the US and China was agreed at talks over the weekend. The Trump administration is also ramping up sanctions on Iran and Venezuela, even as it engages in talks over the former’s nuclear program, running the risk of wider supply disruptions.
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At about 19 cents each, the options represent a relatively cheap bet on — or protection from — a further rally.
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“Speculators want to have calls on the books,” in case tariffs are further dialed back or OPEC+ walks back production hikes, said Robert Yawger, director of the energy futures division at Mizuho Securities USA. “Plus, there is a chance the negotiations with Iran run their course with no agreement and Trump allows the Israelis to attack Iran. All unlikely, but all possible.”
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Despite the rally, September crude futures are still trading around $65 a barrel, some $30 below that level. Prices have been under pressure as the Organization of the Petroleum Exporting Countries and its allies ramp up production at a faster rate than previously advertised. Alongside that, the US and China still retain some tariffs which have pushed analysts to slash their forecasts for economic growth.
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Options markets have turned less bearish as crude has recovered. The premium for puts over calls, which at the end of April was the widest in more than three years, has shrunk by more than half, according to data compiled by Bloomberg.
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