LONDON (Reuters) – Traders and investors have loaded up on bullish Brent oil bets this week, after signals that Saudi Arabia is in no rush to increase production, even with the price near $80 and as buyers grow uneasy over the impact of U.S. sanctions on Iranian supply.
Data from the InterContinental Exchange shows that open interest in buy, or call, options at $80 and $85 a barrel that expire on Sept. 25 has jumped nearly 45 percent in two days.
GRAPHIC: Investors bulk up on bullish Brent crude options – reut.rs/2MLKNz5
At a combined 54,000 lots, equivalent to about 54 million barrels of oil, open interest for these two calls alone is now equal to nearly half of that for all November calls and puts with strikes between $60 and $100 barrel.
The November Brent crude futures contract rose as much as 1 percent to nearly $80 a barrel on Tuesday after a media report cited unnamed sources as saying Saudi Arabia was “comfortable” with the price at that level.
On Wednesday, the price was down 3 cents at $79.00 by 1110 GMT.
“The market may have taken this as a sign that supplies may not go up much in response to further declines in Iranian crude exports,” consultancy JBC Energy said in a note.
Reuters reported on Sept. 5 that Saudi Arabia wants oil to stay between $70 and $80 a barrel for now, as the world’s biggest crude exporter strikes a balance between maximizing revenue and keeping a lid on prices until U.S. congressional elections.
GRAPHIC: Brent crude volatility smile – reut.rs/2MKdpsl
The prospect of U.S. sanctions hitting Iran’s roughly 2 million barrels per day in crude exports from November, when the rest of OPEC has limited spare capacity, has helped oil stay well above $70 a barrel since May, when Washington announced it would ditch an international nuclear agreement with Tehran.
U.S.-China trade tensions, together with crises in emerging markets such as Turkey, South Africa and Argentina, have created concern over a possible slowdown in economic growth.
But for now, investors are willing to bet that the most likely course for oil prices is upwards.
Reporting by Amanda Cooper; Editing by Dale Hudson