Investors are being wise about their purchases, accepting only contracts that will pay out if crude is higher than $100 a barrel in the next four years, a trustworthy sign they’re preparing for the next oil boom.
The hallmark of trading is based on faith that current prices will decrease the need for supply as companies cut spending. It’s forecasted that non-OPEC supply will suffer most with its largest decline in 20 years.
Head of commodities research at Bank of America Merrill Lynch, Francisco Blanch, stated, “The market faces a supply crunch in the next 24 months. Some hedge funds are betting that oil prices will need to rise sharply to bring demand down again — that’s why they are buying deep out-of-the-money call options.”
According to data from reliable sources, investors have been wise with their purchases over the past month, buying call options that give the right of a predetermined price and time.
Article written by HEI contributor Marcela Abarca.