Saudi Aramco oil facilities in Jizan were struck on Monday, the Financial Times reported, with the extent of damage still under assessment. The incident has renewed concerns about possible disruption to Saudi oil supplies and prompted an immediate response in energy markets.
West Texas Intermediate (WTI) crude accelerated after the headlines and moved back above $90. The contract was up 1.27% on Monday and traded around $90.40 at the time of writing, having been below $90 before the strike reports emerged.
Short-Term Volatility And Trading Strategies
With WTI spiking past $90 following the strikes on Saudi Aramco’s Jizan facilities today, we recommend derivative traders brace for heightened short-term volatility. Historically, sudden supply disruptions in the Middle East, such as the 2019 Abqaiq attacks which caused a historic 15% surge in oil prices, trigger sharp risk premiums that can decay quickly once damage reports clarify. For the next few days, we should focus on capitalizing on this initial price shock while preparing for rapid shifts as Aramco releases official damage assessments.
Given the sudden price movement, implied volatility on oil options is bound to surge, making long premium strategies expensive. We suggest looking at bull call spreads rather than buying naked calls, as this limits the impact of high premium costs while still capturing the upward momentum. Alternatively, writing out-of-the-money put options could be a highly profitable way to collect premium, supported by the new $90 price floor established by these geopolitical risks.
Market Structure, Inventory Levels, And Impact Prospects
We must also pay close attention to the futures curve, where the prompt-month spread is likely to widen into deeper backwardation as immediate supply concerns spike. Trading near-term calendar spreads by buying the front-month contracts and selling later-dated contracts allows us to exploit this immediate supply anxiety. Historically, during similar geopolitical flashpoints, the front-month contracts command a significant premium over later months, offering strong roll-yield opportunities.
Global crude inventories are already tight, with recent Energy Information Administration data showing US commercial crude stockpiles hovering about 4% below their five-year seasonal average. This supply tightness means any prolonged outage at the 400,000 barrel-per-day Jizan refinery will keep heavy upward pressure on WTI. We should maintain a close eye on the upcoming weekly inventory reports to see how quickly the physical market responds to this disruption.
