Oil Traders Foresee Price Surpassing $200 A Barrel This Month

Traders jumped into options on oil as it reached its highest level since 2008, with some even placing low-cost bets that futures would soar beyond $200 by the end of March.

According to Bloomberg, prices for buying call options on higher oil prices soared Monday as the market assessed the risk of a supply disruption from Russia, one of the world's largest exporters.

At least 200 contracts for the option to buy May Brent futures at $200 per barrel traded on Monday, according to ICE Futures Europe statistics.

The options will expire three days before the deal settles on March 28. The cost of purchasing them has increased by 152%, to $2.39 a barrel.

The ICE reported that the cost of a $150-per-barrel call option on the June Brent contract has more than quadrupled since Friday, while the cost of $180 call options has increased by 110 percent.

The May Brent contract went up a lot because traders were worried about claims that Russia was going to stop exporting oil to Libya and that Iranian nuclear talks were taking longer than expected.

According to JPMorgan Chase & Co., if Russian supplies are disrupted further, Brent crude may end the year at $185 per barrel, while Australia & Fresh Zealand Banking Group Ltd. believes that new sanctions will affect around 5 million barrels per day of pipeline and seaborne oil supply.

Russia is the world's third-largest producer of crude oil, after only the United States and Saudi Arabia. According to the International Energy Agency, the OPEC+ members exported 7.8 million barrels per day of crude, condensate, and oil products in December last year, supplying buyers in Europe, the United States, and Asia with key fuels such as diesel, fuel oil, vacuum gasoil, and naphtha, a petrochemical feedstock.

This news comes as a blow to Nigeria's citizens, who are currently undergoing one of the longest periods of PMS scarcity. There are fears that the prices being charged by some petrol stations may become the new normal if the war between Russia and Ukraine, the Iran nuclear deal, and the Libyan crude oil shortage continue. 

The new normal for PMS across the country may be between N165 (official rate) and N300 by the end of next week. In essence, it is a blessing to the government for increasing foreign exchange earnings and a curse to the citizens because of the high cost of buying fuel and its attendant effect.