The Scramble to insure against more oil price rises  

Posted by Big Gav

The FT has a look at the "Scramble to insure against more oil price rises".

Energy consumers and speculators are scrambling to take out options contracts to insure themselves against oil prices rising above $100 a barrel – a further sign of growing expectations of a spike in the crude market.

Some have even taken out contracts to protect themselves against prices rising to $250 a barrel in the next two years. The buying frenzy has been “extraordinarily” strong in the past week as oil prices rose to a record high of $96.24 a barrel, according to traders and bankers. “Options calls of strikes well over $100 a barrel are being bought by the thousands,” said Nauman Barakat of Macquarie Futures in New York.

The strong flows in call options – contracts that give the right to buy at a predetermined price and date – are boosting short-term oil prices as the banks that sell them have to hedge some of their positions by buying crude oil in the spot market.

There has already been a sharp increase in the number of outstanding options contracts, or “open interest”, at the New York Mercantile Exchange. This represents only a fraction of the overall market, which is concentrated on over-the-counter deals.

Links:

* The Oil Drum - When Will Russia (and the World) Decline?
* The Oil Drum - Peak oil coverage on CNBC
* The Energy Blog - Total Chief Warns of Peak Oil
* RealClimate - Is the ocean carbon sink sinking?
* The Oil Drum - The Kipper Gas Field: Our CO2 Future
* Clean Break - Is the fuel-cell car dead?
* The Energy Blog - Gore Nightmare Wins as Europe Pays to Ship U.S. Coal
* Reuters - Tibetans wake up to nosebleeds in super-dry autumn
* TreeHugger - Red Cross To Georgia: 'Be Ready For Drought Emergency With 10 Cases Of Bottled Water Per Person'
* Douglas Adams - Don't Panic

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