And with the U.S. now moving to curtail Russian oil imports — and leaning on allies to do the same — as punishment for invading Ukraine, it's not just the absolute price level that has market watchers concerned.
“It's just the speed of this move [that's] concerning because it wipes out people in certain areas,” Bob Iaccino, Path Trading Partners Co-Founder, told Yahoo Finance on Monday.
The cost of gasoline has soared in recent weeks as Russia’s invasion of Ukraine applies pressure on global oil markets. At the same time, the U.S. has begun lifting mask mandates, a move that could spur up consumer spending and travel.
The national average for a gallon of regular gasoline is now well above $4, according to AAA, and even higher in some areas. Targeted Western sanctions haven't explicitly targeted Russia’s daily exports of 4 million to 5 million barrels, but have severely hampered its ability to sell its crude.
Russia’s exports account for roughly 8% of the global oil market. And traders are sensing an opportunity to buy options – betting on a direction of a commodity price – with volumes surging in recent weeks.
Iaccino described it similar to the AMC (AMC) and GameStop (GME) phenomenon: “The call plays are definitely starting to skew. It's starting to get a lot more activity in the call options, not necessarily in the outright futures, because the volatility is just through the roof.”
The activity has been the strongest in call options of “strikes around $100, $150 to even $200” pushing that “activity in the future side of things," the analyst said. Those are fairly aggressive bets on U.S. crude prices scaling even higher in the coming weeks and months.
Even though the U.S. and Europe moving to curtail energy supplies from Russia, Iaccino noted “that’s not likely to affect the supply and demand dynamics.”
He pointed out that crude oil prices are different from stocks, because “crude oil has to sort of assimilate itself to the cash supply and demand situation. And we don't really know what that is, and it points to a little bit more upside in terms of the risk,” he added.
And since oil is a relatively fungible global commodity, bans from U.S. and Europe could see China come in and scoop up discounted Russian oil.
“It'll go to China and that means China is going to start buying some less oil from other sources, which might balance it out,” Iaccino said. With that being said, "you can easily see $20 higher from where we are right now, which only put us about eight or $10" above current levels, he added.
Dani Romero is a reporter for Yahoo Finance. Follow her on Twitter: @daniromerotv