Could the energy crunch get so bad that oil prices hit US$200 a barrel? One options trader thinks so.

Brent US$200 calls for December 2022, options contracts that would profit a buyer from a rally toward that level, traded 1,300 times on Wednesday. While the contracts don’t expire until October next year, they could profit from any sharp spike in prices this winter or next summer.

In a market where a single cargo of crude would currently fetch about US$160 million, the US$130,000 wager on oil reaching an all-time high is tiny. However, it reflects the fact that a growing number of options traders are betting that an energy crunch this winter may see prices rip higher.

Brent crude, the global benchmark, hit $80 for the first time in three years this week. Market watchers see demand exceeding supply to the tune of more than a million barrels a day and expect that switching from gas to oil because of high power prices could exacerbate that deficit. Bank of America Corp. this week underlined an earlier call that crude could top $100 a barrel at some point over the winter, if it is exceptionally cold…read more.

Enbridge Inc said on Wednesday its Line 3 pipeline replacement project will begin operating on Oct. 1, the first successful major expansion of Canadian crude export capacity in six years, clearing hurdles that other projects were unable to overcome.

Its completion is welcome news for the Canadian energy sector after a number of proposed pipelines, including TC Energy’s Keystone XL, were scrapped due to environmental opposition and regulatory delays.

The $8.2 billion project allows Enbridge to roughly double its capacity to 760,000 barrels per day on the 1,765 km-long (1097 mile-long) pipeline.

Line 3, built in the 1960s, carries oil from Edmonton, Alberta, to refineries in the U.S. Midwest, but for years was transporting less than its capacity because of age and corrosion. The project was opposed by environmental and Native American groups, particularly in Minnesota, the last stage of the expansion…read more.

The price of natural gas has soared to a 13-year high, as fears over scarcity ahead of the winter months intensifies.

October futures for natural gas jumped by more than 10% on Monday to close at US$5.86 per million Btu, marking the sharpest increase since February. November futures were also up on Monday, hitting a fresh high of nearly US$6 per million Btu— the highest since November 2008. Energy prices have been on a steep rise over the past several weeks, particularly as low reserves in Europe and China ignite fears over widespread shortages ahead of the cold season.

The steep rise in natural gas prices has been unprecedented across Europe, and is expected to be even worse than the US oil price shock of the 1970s, according to estimates from Rabobank. European natural gas prices have soared to above $25 per million Btu, which is a staggering 400% more than the average of the past decade, and significantly higher than the commodity’s price in the US…read more.

Global fuel demand is expected to reach pre-pandemic levels by early next year as the economy shrugs off pandemic woes, but spare refining capacity is likely to weigh on outlook, oil producers and traders said on Monday.

While a persistent rise in COVID-19 infections in several markets has hurt recovery in demand for some refined products such as jet fuel, consumption trends of petrol and diesel indicate higher growth, the industry leaders said.

They were speaking at the Platts APPEC 2021 conference that is being held in a hybrid format this year, including both in-person and virtual participants.

“We saw refining margins rebound as demand rebounded… But overall for the world, there’s still a lot of unutilised capacity and a lot of capacity has been taken off stream,” said Eugene Leong, president of BP Singapore and CEO of BP’s trading & shipping arm of Asia Pacific and the Middle East…read more.

Oil prices rose on Thursday to their highest levels since late July after U.S. crude stocks dropped to their lowest in three years and the broader market received more clarity about the Fed’s next policy moves.

As of 10:52 a.m. EDT on Thursday, WTI Crude traded above $73 a barrel, up by 1.19% at $73.15—its highest price since the end of July. Brent Crude prices were above $76 per barrel, having risen by 0.91% on the day at $76.88.

After the Fed signaled on Wednesday that it could begin tapering asset purchases as soon as November and potentially start raising interest rates as soon as next year, oil market participants turned their focus to global oil inventories, especially those in the United States.

Rising U.S. equity markets, with the S&P 500 opening higher on Thursday, and a weakening U.S. dollar also supported oil prices…read more.