About 2.5 percent of global oil production moves through Egypt via the Suez Canal and the Suez-Mediterranean Pipeline, according to Goldman Sachs Group Inc. Photographer: Dana Smillie/Bloomberg
Feb. 3 (Bloomberg) -- Shokri Ghanem, chairman of the state-owned Libya National Oil Corp., talks about oil supplies amid unrest in Egypt and prospects for an output increase by the Organization of Petroleum Exporting Countries.
He speaks with Francine Lacqua on Bloomberg Television's "On the Move." (Source: Bloomberg)
Investors increased bets that oil
prices may surge to as much as $250 a barrel on concern the
unrest in Egypt will disrupt traffic in the Suez Canal and
spread to Saudi Arabia.
Open interest in the $250 call option for December, which
give the buyer the right to purchase oil futures on the New York
Mercantile Exchange at that price, climbed to 242 from 142 on
Feb. 1 and stayed at that level yesterday. The most active
options yesterday were the March and December $100 calls
followed by the December $120 call.
“What we are seeing is similar to people buying a lottery
ticket,” said Stephen Schork, president of Schork Group Inc., a
consulting company in Villanova, Pennsylvania. “They are making
a bet that there will be a disruption of the Suez Canal or an
uprising in Saudi Arabia, neither of which looks likely.”
The Suez Canal is operating as usual, Egypt’s Prime
Minister Ahmed Shafik said at a media conference today. About
2.5 percent of global oil production moves through Egypt via the
Suez Canal and the Suez-Mediterranean Pipeline, according to
Goldman Sachs Group Inc.
The December $250 calls slipped 1 cent to 10 cents a barrel
today, or $100 per contract.
Crude oil for March delivery slipped 32 cents, or 0.4
percent, to settle at $90.54 a barrel on the New York Mercantile
Exchange today. The contract touched $92.84 on Jan. 31, the
highest intraday price since Oct. 7, 2008. Futures are up 18
percent from a year ago.
May $125 Calls
The May $125 calls were the most-actively traded option
yesterday, with 24,828 contracts exchanged. That dwarfs the
previous highest single-day volume for the option of 1,101 lots.
Open interest jumped to 20,467 contracts from 1,398 a day
earlier.
Oil capped the biggest two-day rally since May on Jan. 31
on concern the unrest in North Africa will spread to crude-
exporting nations in the Middle East. Saudi Arabia, the United
Arab Emirates and Kuwait, three of the Organization of Petroleum
Exporting Countries’ six biggest oil producers are located on
the Arabian Peninsula and haven’t seen unrest.
Saudi Arabia is “perfectly unstable,” like Egypt, where
10-day protests are threatening the 30-year rule of President
Hosni Mubarak, said Nassim Taleb, author of “The Black Swan.”
“A perfectly fragile country is a country, say like
Egypt” before “the recent events, where there is no variation
and then -- puff -- you got a crisis and it’s mayhem,” Taleb, a
New York University professor, told a conference in Moscow
hosted by Troika Dialog. “So Egypt is perfectly unstable, Saudi
Arabia, countries like that.”
Middle East Protests
Protests in Tunisia led to the ouster of President Zine El Abidine Ben Ali on Jan. 14 and Jordan’s King Abdullah replaced
his prime minister on Feb. 1 after demonstrations. Thousands of
Yemeni demonstrators gathered today in the capital Sanaa and
police used tear gas in the port city of Aden.
“Egypt is the only thing that’s changed in the last
week,” said Michael Lynch, president of Strategic Energy &
Economic Research in Winchester Massachusetts. “Investors are
betting on further trouble across the Middle East. The chances
of a disruption in the big exporters is small, but there’s been
unrest in smaller ones such as Yemen and Sudan.”
To contact the reporters on this story:
Mark Shenk in New York at
mshenk1@bloomberg.net.
To contact the editor responsible for this story:
Dan Stets at
dstets@bloomberg.net.