Some options traders are betting that oil prices could jump to $200 a barrel by the end of next year as the energy crunch in Europe and Asia shows signs of worsening just ahead of the winter heating season in the northern hemisphere.
Call options at Brent at $200 a barrel for December 2022 traded 1,300 times on Wednesday, according to data from ICE Futures Europe cited by Bloomberg.
Traders would profit from those call options if oil prices were to rally to record levels over the next year.
In recent days, the call options for triple-digit oil prices next year have increased, suggesting that more traders are betting on higher oil prices over the next 12 months.
According to Bloomberg estimates on ICE Futures Europe data, wagers on Brent $100 calls through to the end of 2022 have jumped by 20,000 contracts this month alone.
Over the past month, the perceived energy supply shortage has led to record gas and power prices in Europe, record spot liquefied natural gas (LNG) prices in Asia for this time of the year, and multi-year high coal prices in Europe and Asia.
Investment banks revised up their oil price forecasts for the end of the year, although some started to warn that at $80 oil or higher, demand destruction is just a matter of time.
Earlier this month, one of Japan’s leading banks, Mitsubishi UFJ Financial Group (MUFG), said that Brent Crude prices were set to retreat to $64 a barrel by the end of 2021, while the energy minister of Oman warned that the International Energy Agency’s suggestion of no new investments in oil could push oil prices to $200 a barrel.
Bank of America said that oil prices could hit $100 per barrel over the next six months if we have a colder-than-usual winter, which could be the most important driver of global energy markets in the coming months.
By Tsvetana Paraskova for Oilprice.com
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If the divestment pressure continues unabated for the next three year, there is a big possibility we may see $200 oil. This could inflict real damage on the global economy.
Trying to accelerate global energy transition at the expense of fossil fuels will never ever succeed. Instead it will lead to a collapse of the global economy.
The only rational way to combat climate change is to stop calls for ditching fossil fuels and employ the latest carbon-caching technologies to reduce emissions during the production of oil and natural gas.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London