Oil traders are scooping up options contracts that would pay out if U.S. crude futures plummet against international benchmark Brent, a signal that some believe the Biden administration could intervene in the market again to bring down oil prices. 

Some traders have bet on the small chance that West Texas Intermediate’s discount to Brent surges past $10 a barrel next year. The last time the spread traded near $10 was in 2018 and 2019 when severe pipeline constraints trapped barrels in the Permian Basin - the largest oilfield in the country. The spread was trading around $3.60 a barrel Tuesday.  

The oil market has been volatile as top consuming nations came together in an unprecedented move last month to release crude from their emergency reserves and bring down energy costs. The Biden Administration’s ongoing focus on lowering gasoline prices has now prompted some traders to purchase some contracts that could pay out just in case they takes further steps, such as limiting or pausing crude exports. 

Even if the spread between the benchmark contracts - a key indicator for pricing imports and exports - doesn’t widen all the way to $10, the options could still pay out marginally. The options also act as protection for physical traders who could risk losing millions of dollars on a cargo if the U.S. suddenly bans exports. 

While small in volume, the option trades have popped up consistently over the past week. Since last Tuesday, the equivalent of 11.25 million barrels have changed hands, with 10.1 million barrels of brand new positions being opened, betting on the chance that the premium of Brent to West Texas Intermediate crude futures surges past $10 a barrel next year.  

Most traders believe an outright ban on U.S. exports is unlikely, making the trades akin to buying a lottery ticket. A halt in exports would trap more oil in the U.S. and pressure domestic prices as local refiners are not designed to process the type of light crude produced at home efficiently.