Oil above US$80 before Christmas?

With oil prices trading near their highest level in two years, some traders are betting that the price rise could have more room to run.

A total of 48,000 contracts have traded over the last few days and would profit most if Brent spikes before Christmas, including several large individual trades. They include 14,000 options giving traders the right to buy February Brent at US$71/bbl, as well as 22,000 for US$85 and 12,000 for US$80. They all expire on the 21^st December.

Oil prices have rallied in recent weeks as OPEC supply cuts help to rebalance an oil market plagued by oversupply. More recently, growing tensions between Saudi Arabia, OPEC’s largest oil producer, and some of its neighbours helped prices break above US$60/bbl for the first time since 2015.

Against that backdrop, the crude options market has generally been looking brighter. The so-called put skew, the difference in demand for bullish call options versus bearish put options, has also fallen in recent days. That gauge closed at its least bearish level since late-August on the 9^th November, bolstering oil’s rosy outlook.