Think oil at $100 a barrel seems expensive? Speculators are already betting that the price will double to $200 by the end of the year.
On the floor of the New York Mercantile Exchange (Nymex), the number of options purchased to buy oil at $200 has leapt 10-fold in the past two months to 5,533 contracts.
The increase in demand is a record for any similar period according to Bloomberg News. The price for the contracts has jumped 36% since early December.
Options contracts are a simple way for investors to speculate on rising prices. Buyers do not have to keep them until the price hits $200 — they can simply sell them on as their value rises.
The number of $200 contracts is still extremely small in the context of the overall options market — and Kevin Norrish, director of commodity research at Barclays Capital, suggested that it would take a "massive supply shock", such as another war in the Middle East, for the price to double this year.
On the floor of the New York Mercantile Exchange (Nymex), the number of options purchased to buy oil at $200 has leapt 10-fold in the past two months to 5,533 contracts.
The increase in demand is a record for any similar period according to Bloomberg News. The price for the contracts has jumped 36% since early December.
Options contracts are a simple way for investors to speculate on rising prices. Buyers do not have to keep them until the price hits $200 — they can simply sell them on as their value rises.
The number of $200 contracts is still extremely small in the context of the overall options market — and Kevin Norrish, director of commodity research at Barclays Capital, suggested that it would take a "massive supply shock", such as another war in the Middle East, for the price to double this year.
"It's not outside the bounds of possibility — but it's a very extreme possibility," said Norrish. "It would have to be something cataclysmic — you would have to see a very large proportion of supply taken out of the market for that to happen."
Barclays Capital predicts an average oil price of $87.40 for 2008. It expects the market to remain tight, with demand strong in America and Asia and weak supply from non-Opec countries.
Motorists are feeling a direct impact from the soaring oil price. Recent figures from the AA suggested that the average cost of a tank of petrol has risen by £7.36 over the last year. Drivers are paying about £1.03 a litre.
Instability in Iran and Pakistan is contributing to jitters on commodity trading floors in London and New York. Demand is soaring to fuel industrial expansion in economies such as China and India.
Oil initially touched $100 on Wednesday following a controversial trade by a floor trader at a level above the prevailing price. The price then reached a record $100.09 on Thursday.
A jump in US unemployment weakened oil prices today, sending the cost of a barrel of crude down $2.95 to $94.96 during early trading. Unemployment rose from 4.7% in November to 5% in December, in a sign of deterioration in the US economy which could slow long-term demand for raw materials.
Barclays Capital predicts an average oil price of $87.40 for 2008. It expects the market to remain tight, with demand strong in America and Asia and weak supply from non-Opec countries.
Motorists are feeling a direct impact from the soaring oil price. Recent figures from the AA suggested that the average cost of a tank of petrol has risen by £7.36 over the last year. Drivers are paying about £1.03 a litre.
Instability in Iran and Pakistan is contributing to jitters on commodity trading floors in London and New York. Demand is soaring to fuel industrial expansion in economies such as China and India.
Oil initially touched $100 on Wednesday following a controversial trade by a floor trader at a level above the prevailing price. The price then reached a record $100.09 on Thursday.
A jump in US unemployment weakened oil prices today, sending the cost of a barrel of crude down $2.95 to $94.96 during early trading. Unemployment rose from 4.7% in November to 5% in December, in a sign of deterioration in the US economy which could slow long-term demand for raw materials.
By Andrew Clark
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