NYMEX oil futures, options volumes set records on Egypt jitters

31 January 2011 18:45  [Source: ICIS news]

HOUSTON (ICIS)--NYMEX light sweet crude oil futures and options both set records for volume on Friday, exchange owner CME Group said on Monday, underscoring market jitters over Egypt's deteriorating political situation.

Volumes in light sweet crude futures - also known as the WTI contract - reached a record 1,472,088 on Friday, beating the previous record of 1,423,536 contracts set on 13 April 2010.

WTI options volume on Friday was a record of 290,365 contracts, passing the previous high of 282,860 on 16 September 2008. 

Joe Raia, managing director for energy and metals products at CME Group, acknowledged the role of geopolitical uncertainty in the record volumes.

In such uncertain circumstances, investors "want the certainty of being able to hedge", he said.

Raia declined to comment on the relationship between volumes and prices, or the role of speculators in the WTI futures market.

Global oil prices rose sharply on Friday as market participants feared that Egypt's unrest, which itself followed a popular uprising in Tunisia, could spread to other Mideast countries and disrupt oil supplies from the region.

There are also concerns that the Egyptian disorder could interrupt the flow of oil tankers and other ships through the Suez Canal.

WTI futures for March settled on Friday at $89.34/bbl, up $3.70. On the Intercontinental Exchange, the March Brent contract rose $2.02 to $99.41, pushing forward months above $100/bbl starting from July.

Friday's record volume in futures was well above the daily average for the month of January at 891,646 contracts. That average is up 56% from January 2010.

The options record was almost double the January average of 158,359, which was up 16% from a year earlier.

Each WTI futures contract represents 1,000 bbl of oil, meaning Friday's trading represented 1.47bn bbl of oil - or around 17 times the global daily demand of 86m bbl, and a financial value of around $130bn (€96bn).

Analysts have linked periods of high volume in oil futures to increased speculative activity, a factor that is also credited with sustaining oil prices at the relatively high levels seen in the past five years despite ample supply.

The OPEC oil producers use the perceived link between futures volumes and high prices to argue against increasing their own oil output.

"Increasing investor appetite for crude oil futures continued to lend support to prices," the OPEC secretariat said in its January report on world oil markets.

($1 = €0.74)

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By: Stephen Burns
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