WTI fell after two sessions of gains and traded near $100.50 a barrel in Asian hours on Wednesday, even as a widening set of supply disruptions across the Middle East continued to shape pricing. Saudi Arabia reportedly cancelled several September crude deliveries to European customers after drone attacks forced an emergency shutdown of the East-West pipeline, a key route used to bypass the Strait of Hormuz. With Iran-backed Houthi militants resuming strikes in the area, the restart timetable for the pipeline remains unclear.
Supply curbs also reached North Africa, where Libya’s national oil company suspended operations at two major oilfields and a pumping station because of ongoing local protests. Separately, the war in Eastern Europe has affected energy assets, with Russia targeting petrol stations in Kyiv and Ukraine striking a Russian refinery, despite US President Donald Trump saying both sides had agreed to stop attacks on each other’s energy infrastructure. TD Securities said the risk backdrop for energy prices remains skewed to the upside, pointing to elevated upside risks tied to infrastructure attacks in the Middle East and Russia.
Derivative Strategies Amid Heightened Supply Risk
As WTI hovers around $100.50 per barrel, we believe derivative traders should position themselves for sudden upside breakouts in the coming weeks. Historically, major supply disruptions like the 2019 Saudi Abqaiq attacks caused a 15% price spike in a single day, proving how quickly geopolitical shocks can trigger massive rallies. We recommend buying out-of-the-money call options on WTI for November 2026 to capture this potential volatility without risking unlimited capital.
With implied volatility surging due to Middle East pipeline closures and ongoing drone strikes, standard futures contracts carry extreme overnight gap risk. To mitigate this, we suggest utilizing bull call spreads, which limit premium costs while still allowing us to profit from a march toward $110 or $115. Recent energy data shows global oil inventories are already running roughly 2% below their five-year seasonal average, leaving the market highly sensitive to any further supply drops.
Opportunities in Refined Product Spreads
We must also look beyond crude and focus on refined products, as recent attacks on Russian refineries and Saudi supply lines directly impact product yields. Traders should consider long positions on heating oil or gasoline crack spreads, which tend to outperform crude during refining infrastructure crises. Historically, localized refining disruptions have pushed crack spreads up by over 30% in a matter of weeks, making this a highly lucrative hedge for the current environment.
