Oil Traders Increase Bets on $125 Crude as Options Trades Jump

Discussion in 'Energy Futures' started by ASusilovic, Nov 1, 2007.

  1. Nov. 1 (Bloomberg) -- Oil traders increased bets that December futures will reach $125 a barrel because of possible disruptions to Middle East supplies and rising demand.

    Traders held call options to buy 2,526 contracts, each representing the right to buy 1,000 barrels, of December oil at $125 in New York as of Oct. 29, from 1 lot on June 29, New York Mercantile Exchange data show. Bets on $100 oil are also surging: Traders held options to buy 49.7 million barrels of December oil at that price on Oct. 30, up from 30 million barrels on Jan. 2.

    Crude oil for December delivery rose to a record $96.24 a barrel in New York today, the highest since the futures began trading in 1983. Prices have soared 19 percent the past month as demand pared inventories, a weaker dollar spurred investors to switch into commodities, and political tension in Iran and Iraq attracted speculative buying.

    http://www.bloomberg.com/apps/news?pid=20601087&sid=av_HNRVcENRI&refer=home

    I think this is good time to short...
     
  2. The flaw with this article is that "traders" have also shorted the calls in equal number to those long, thus betting on the price *not* exceeding that level. There is no information value in some people buying out of the money calls in a market - it is neither bullish nor bearish by itself.
     
  3. Margins should be raised every $5 until it becomes no longer profitable to speculate at these levels.
     
  4. ?............Suss, Are you on one side of that 500-lot of December-$160-calls?
     
  5. Nazzdack, I had some calls indeed, but sold them for a lousy 100 and something % profit ! Unfortunately ! I recalled the old saying : "A bird in the hand is worth two in the bush."

    By the way, I read this piece of news :

    Scramble to insure against another oil spike


    Energy consumers and speculators are scrambling to take out options contracts to insure themselves against oil prices rising above $100 a barrel - a further sign of growing expectations of a spike in the crude market. More…

    Energy consumers and speculators are scrambling to take out options contracts to insure themselves against oil prices rising above $100 a barrel - a further sign of growing expectations of a spike in the crude market. Some have even taken out contracts to protect themselves against prices rising to $250 a barrel in the next two years. The strong flows in call options are boosting short-term oil prices as the banks that sell them have to hedge some of their positions by buying crude oil in the spot market.

    You think it´s an exaggeration to buy some $ 250 protection ?:)
     
  6. Zanatos

    Zanatos

    I wouldn't be taking your news from Bloomberg, as they have no idea what they are talking about...when explaining oil prices, they look for the closest significant event of the day...and state "X-move" was caused by "Y", often revising "x" and "y" throughout the day...the article you posted stating that there were calls to buy 2,400 contracts...2,400 contracts is a joke, in an oil market that is trading 500,000 contracts a day...
     
  7. ?........an exaggeration?........$250-calls?.......YES! Hysterical forecasts at all-time high prices are another sign of a long-term market top. One of these days. I'll be correct.
     
  8. If this forecast is accurate, oil could easily go to $250:

    http://edition.cnn.com/2007/BUSINESS/10/24/oil.decline/

    LONDON, England (CNN) -- The world has reached the point of maximum oil output and production levels will halve by 2030 -- a situation that will eventually lead to war and disaster, a report claims.

    The German-based Energy Watch Group released a report Tuesday saying the world's oil production peaked in 2006 and from now on will drop by around 3 percent a year. It says that by as early as 2030, the global availability of oil will be half of what it was at its peak.

    "It's a very serious result," said Hans-Josef Fell, a German lawmaker from the environmentalist Green Party who commissioned the report. "I fear the world will come into a big economic crisis in the coming years."

    The report warns that coal, uranium, and other key fossil fuels are also in declining supply. It predicts the fall in fossil fuel production will bring with it the threat of war, humanitarian disaster, and general social unrest.

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    But Leo Drollas, who leads oil and gas market analysis and forecasting at the Center for Global Energy Studies in London, said there are plenty of supplies and no looming crisis. He said the report sounds like "scaremongering."

    Drollas says production could still slow one day, but only because new reserves will be considered too difficult or expensive to extract.

    "Oil could be left in the ground and we could move on to another fuel in the future, not because we're running out of oil but because, economically speaking, it is not worth extracting the oil," Drollas said.


    The debate comes as oil prices have hovered at record level. Wednesday morning, NYMEX crude was listed at $84.96 a barrel; oil prices topped $90 a barrel last week.

    Analysts do agree, however, that oil prices could continue to rise, especially if there is further instability in the Middle East.
     
  9. Zanatos

    Zanatos

    All of this conjecture is nonsense, oil as an energy source is getting more and more implausible, by 2030, oil will be obsolete. Its only due to the fact that oil is politically and corporately championed that modern technology and lifestyles have become so dependent upon it. (As another thread on this site claims that Petro China is the first trillion dollar company, which is obviously where the vested interest/power lies). For the money that the US has spent in Iraq...they could have developed alternative energy sources that would have quickly solved its oil dependency.
    It's only because of your broken American political system, coupled with an uneducated public, that knows more about Britney Spears' drinking habits than political science/world affairs, that this situation has been perpetuated.
    As the green movement gains strength (public sentiment), and world governments tally up the economic damage...more and more alternative energy sources/technologies will come online.
     
  10. Oil obsolete? Not quite. Alternatives? There are none that have the energy density to compete with oil -- that's why we use it. Try converting just a small fraction of the energy we use in oil into your so-called alternates, and you'll soon find yourself without enough land for biofuel, uranium for nuclear, rare earth metals for solar cells, etc. It's very simple math and quite grim when you actually look at the numbers.

     
    #10     Nov 6, 2007