New Straits Times
Traders bet on US$100 US crude
NEW YORK/LONDON: Oil traders have piled into wagers that United States crude oil could surge to US$100 (RM415) a barrel by next year, a milestone that until recently many considered unthinkable due to record US production growth and relatively flat global demand.
But the imminent return of US sanctions on Iran and bottlenecks keeping US oil from getting to market have fuelled a rally that has taken benchmark oil prices to four-year highs.
While big producing nations say supply is ample, hedge funds and speculators are increasingly sceptical of that argument, betting the market could rally further as sanctions on Iran’s crude exports return on November 4.
The bullishness is visible in the US options market. The number of open positions on US$100 December 2019 West Texas Intermediate call options, bets on futures hitting that price by the end of next year, has risen by 30 per cent last week to a record 31,000 lots, according to Chicago Mercantile Exchange data.
“Over the last two weeks, there’s been a lot more evidence that even some of the larger customers, India and China, are not going to be buying Iranian crude from next month,” said Mobius Risk Group vice-president of research and analysis John Saucer.
As a result, he said, “these sanctions are likely to be a lot more effective than people even thought”.
Overall exports from Iran have dropped to two million barrels per day last month from 2.8 million bpd in April, said the Institute of International Finance.