Energy Stock Option Activity Explodes On Goldman Forecast

Oil Unusual Option Activity Report

In case you were wondering when the oil rally would end, it’s not quite yet. At least that’s what today’s price and option’s activity would seem to indicate. The catalyst appears to be coming from an upgraded oil price forecast from Goldman Sachs based on improved fundamentals. Today’s rally is a key point in the trend of many energy names and the options market is indicating that it will continue.

Goldman on Oil

The oil forecast came from Goldman Sachs Group Inc (NYSE: GS). The company is projecting that Brent crude, which trades at a premium to West Texas Intermediate, could reach $70 in 2Q and $75 by 3Q.

The bullish catalysts are the inelastic supply of oil and increasing demand on a post-COVID-19 economic recovery. Looking at the current supply, you’ll see that we are well within the 5-year oil supply range in the U.S.

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The tightness of the market is a result of lower global production and imports. Current production is running over 2 million barrels a day below last year at the same time. The likelihood oil companies to increase supply dramatically is low.

(Click on image to enlarge)

More than anything, the current forecast is looking for oil to remain elevated. This is particularly good news for oil companies that have largely slashed Capex spending and have pushed out large debt payments to 2024.

Oil Option Activity

The breadth of significant oil option activity was pretty telling that traders are looking for volatility in this sector. Here’s a breakdown of some of the stocks that option traders were targeting and the options they were trading.

  • Energy Select Sector SPDR Fund (NYSEARCA: XLE)
    • 10,500 17 SEP 21 $52 call BOT in one print @ $3.60
    • 10,500 17 SEP 21 $59 call sold in one print @ $1.91
    • Trade rolls part 30 JUN 21 call vertical inventory out and up
  • Energy Transfer LP Unit (NYSE: ET)
    • 39,854 5 MAR 21 $8 calls mostly BOT @ $0.06 to $0.20
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