After oil passed $60 a barrel for the first time in six months, the New York Mercantile Exchange’s fastest-growing options trade in July is for a 16 percent drop.
The number of options to sell oil at $50 a barrel for July settlement rose 22 percent last week to 24,948. Traders expect prices to fall because U.S. crude inventories are 1.8 percent below the highest in two decades, and the International Energy Agency says demand is falling the most since 1981. There’s enough unsold crude stored in offshore tankers to supply the U.S. for a week, and oil fell below $60 today in New York.
Crude jumped as high as $62.26 a barrel on May 20 on optimism that the worst of the global recession and the Organization of Petroleum Exporting Countries agreed to cut supplies by the most on record. Now, economic reports are increasing speculation that the world economy will continue to sputter, and OPEC, which meets May 28 in Vienna, has yet to complete the supply curbs it promised in December.
“Oil prices are rising way ahead of reality, way ahead of fundamentals,” said Eugen Weinberg, a senior commodity analyst at Commerzbank AG in Frankfurt. “It would be more reasonable for prices to drop a little and correct to $50 or below.”>>>MORE
Tuesday, May 26, 2009
Hottest Oil Options Indicate 16% Drop as Demand Falls