- The daily volume of crude option trades doubled to 240,000 contracts since the beginning of February.
- What this increased appetite for oil options signals is expectations that oil prices will continue higher.
The number of traders with bullish positions on oil options is growing fast amid soaring international benchmarks.
Citing analysts and market data, Reuters reported that the influx of bullish options traders takes place as oil prices reach highs last seen a decade ago.
According to the data cited, between January 19 and February 9, the average volume of oil options traded in the United States on the CME exchange stood at 126,000 daily. Since then, the report noted, the average daily volume of oil options trades has increased to 178,000 contracts, with the first two days of March seeing daily volumes of over 240,000 contracts.
What this increased appetite for oil options signals is expectations that oil prices will continue higher, which is indeed the most likely development in the immediate term.
Russian oil export volumes have dropped dramatically in the aftermath of the Ukraine invasion and the series of sanctions that Western powers imposed on Moscow as a response. According to data from Energy Intelligence, Russian exports of crude have dropped by a third—around 2.5 million bpd—since the start of the sanctions.
This comes on top of an already tight oil market globally and an unwillingness on the part of OPEC to step up production ramp-ups to rein in prices. Russian oil exports, in the meantime, are likely to plunge even further as the West tightens the sanction noose, leaving traders and other buyers uncertain whether trading with Russia is worth the risk of violating some sanction or another.
Meanwhile, in the United States, there is growing pressure on President Biden to suspend Russian oil imports into the country. In fact, a bipartisan group of legislators has already introduced a bill proposing the suspension of these imports.
"I don't believe this country should be importing anything from Russia," Montana Senator Jon Tester said, as quoted by Reuters. "It will send even a bigger message that the United States is in this with Ukrainians for the long haul."
By Charles Kennedy for Oilprice.com
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