As oil plumbs new depths, someone predicts $80 a barrel this year
http://www.chron.com/business/energy/article/As-Oil-Plumbs-New-Depths-Someone-Sees-80-a-11205317.phpJune 8, 2017
As Brent crude oil closed on Wednesday at its lowest level since before OPEC and other nations agreed to cut output, someone bet half a million dollars on prices surging to $80 by year-end.
Options to buy 10 million barrels of Brent crude for $80 a barrel in December traded Wednesday, far exceeding the next-largest contracts, according to exchange data compiled by Bloomberg. Placed in two trades, the transactions were especially large given they were to purchase crude at 66 percent above the day’s closing price.
Oil prices plunged 4 percent in London and 5 percent in New York on Wednesday as a surprise expansion in U.S. crude stockpiles undermined those analysts arguing a market rebalancing is now under way. Nonetheless, there were also reasons to be bullish, including escalating tensions between Saudi Arabia and Qatar, terror incidents in Iran, and the halting of Libya’s biggest oil field.
“That is clearly a geopolitical insurance premium,” Ole Hansen, head of commodity strategy at Saxo Bank A/S said by phone of the options trades. Tensions in the Middle East are “being ignored right now, but that is dangerous and potentially leaves many being caught in a bear trap.”
Costing 5 cents a barrel, the options trades look most likely to have been placed by a wealthy individual investor or a speculative fund. Alternatively, they could be part of a wider hedging strategy, even though no corresponding futures trades were placed around the same time. The contracts’ value will rise and fall depending on how close Brent futures get to $80 a barrel by the end of the year....
