Save for later Print Download Share LinkedIn Twitter Oil market speculators are increasingly placing bets that crude prices will soar in the coming months.The thinking seems to be that Russia could halt crude exports at some point, analysts say, or would not be able to export due to bans by the EU that start on Dec. 5 for crude and Feb. 5 for refined products.Speculators have bought a combined 111,000 call options for June 2023 Brent passing $149 per barrel when they expire on Apr. 25, 2022, and an even bigger 158,000 contracts on West Texas Intermediate (WTI) topping $119/bbl upon expiration on May 17. There are also 12,700 December 2023 call contracts on WTI breaching $200/bbl and 13,400 December 2023 lots on WTI rising to $250/bbl.In a market where open interest of 10,000 lots is considered significant, the massive volume of call option buys signals that speculators see more upheaval down the line. Placing Their BetsAn analyst told Energy Intelligence that the bets are speculators taking out a form of insurance in case there is another disruption of Russian supply. "It's a cheap war call," they said. “These bets are just what they are: bets,” said a broker, adding that these positions are probably fund managers who have not yet met their targets and are hoping another disruption would get them there.“But I would be doubtful they make any money," the broker said. "Russia has found ways to keep minimizing the impact of the sanctions and will again find ways around the G7 price cap." That cap allows tankers with Western connections like insurance or financing to carry Russian oil if it is bought at or below a certain price, which is expected to be set soon. Russia is currently discounting its crude by $20/bbl or more to bypass Europe and drum up more business in India and China.Crude was selling off on Wednesday amid talk that the G7 price cap could be surprisingly high at $65-$70/bbl, which would be an incentive for Moscow to maximize exports.Getting ButterfliesOil futures contracts have been difficult to trade lately, one analyst said, and it is logical that speculators are now seeking the relative safety of options on those contracts since the costs are defined and the upside is unlimited.“Options are a really easy way to speculate,” the analyst said, especially since trading oil futures is expensive and difficult due to high margins and price volatility.The analyst added that the elevated open interest in the options market is not entirely comprised of one-way bets on higher prices, but include a combination of call and put options — so-called "butterfly spreads."In outstanding June 2023 options contracts, it is most visible in Brent, where there are more than 40,000 call contracts betting on prices moving beyond $100/bbl or $120/bbl, as well as 75,000 put options that would pay if Brent falls below $80/bbl or even $60/bbl.Uncertain WatersTraders in recent months have been trying to make sense of current events that left many wondering whether the oil market would see a lack of supply or falling demand. The large volume of bets on higher prices signals that speculators see the potential for the former. In addition to crude, global refineries continue to struggle to keep up with demand for turning that crude into usable fuels. Diesel margins remain sky-high at around $40/bbl in Europe and $65/bbl in the US. A cold winter and a shortage of natural gas could blow out diesel prices again.Meanwhile, others see oil demand taking a hit due to high prices, China's strict Covid-19 policies and the prospect of a global recession.Amid all that uncertainty, Brent prices have mostly traded in a $90-$100/bbl band since early October. The biggest bets are gambling on more upheaval ahead. The most recent available regulatory data shows that speculators had reduced their bets on a crude price rally after Brent fell below $90/bbl last week.