Stronger Economy Lead to Higher Oil Prices

Oil prices have been progressing strongly as it was supported by a good positive economic growth and some members of Organization of the Petroleum Exporting Countries (OPEC), as well as, Russia.

The international benchmark of oil prices rose at $70 per barrel at 0102 GMT and increase by 4 cents compared to the previous price. Also, this is not far from the three-year high achieved on January 15 at $70.37. The U.S. West Texas Intermediate (WTI) crude futures is at $64.59 per barrel and rose by 12 cents from the previous price. It is almost similar to the December high in 2014 at $64.89 since January 16.

The most recent indication of optimistic economic growth is reflected from the Japanese manufacturing activity which rose at the fastest pace in almost four years in January, based on the survey released on Wednesday.

As economy progresses, this also impacts positively on the oil demand amid the reduction of OPEC and Russia looking for tightening of the market and increasing prices. The deal to hold the production in January last year is planned to continue this year.

There are hints that the traders are in a predisposition for a downward correction while the crude futures climbed to almost 15 percent since early December amid the supportive sentiment of the entire market.

There is a higher demand for a downside protection on the future options market, which explains why there are “speculative bets” on the upside, according to the head of a commodity strategy at Saxo Bank, Ole Hansen.

Trading data demonstrates an open interest that reflects the number of positions that have to be settled. Brent options are sold at $70, $69 and $68 per barrel which rose since the price increase in the middle of the previous week on Intercontinental Exchange (ICE).

In general, there is a higher demand for options in selling brent that the call options, which allows Brent to be bought at a certain price.

Other than that, Hansen also described that the options can be said in a contrary to the upward trend with a correction of 10-15 percent changed and traders start to “book” their profits.