Oil traders were making big bets amid geopolitical uncertainties, Bloomberg data shows, as 3 million barrels of options contracts were snapped up by speculators.
Although the move is widely seen as a Hail Mary, about 3,000 lots of June $250 call options on U.S. crude oil traded Tuesday for just 1 cent each — trades that Bloomberg compared to a lottery ticket due to the unlikely event that they would actually be paid. out. But certainly a project that would pay off handsomely, if at all.
The trades, according to Bloomberg, were apparently associated with $25 puts.
Bullish oil options have reached record highs, with call premiums over puts reaching their highest levels since October as geopolitical tensions between Israel and Iran continue to escalate.
Crude oil benchmark Brent is currently trading near $90 a barrel, while WTI is trading above $85. The last time Brent traded near $90 a barrel was last October.
Oil prices were lower on Tuesday, however, after Federal Reserve Vice Chairman Phillip Jefferson said the US central bank was prepared to maintain its restrictive monetary policy if inflation did not slow as much as expected. The economic development was not enough to lower oil prices significantly, but was enough to offset what could have been a rise after the Biden administration announced it would impose additional sanctions on Iran for its attack on Israel, as geopolitical tensions continue to add an element of supply fear to oil markets.
Oil markets are now waiting for Israel’s response to the Iranian attack to decide the amount of the risk premium for crude oil.
By Julianne Geiger for Oilprice.com
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