An Extension Is Not Enough – Why OPEC Needs To Cut More

10 May 2017   OPEC

Crude oil prices are slumping, and everyone is clamoring to know: how far can oil fall? Is this a buying opportunity, or is the selloff likely to worsen? Bloomberg recently reported a large options trade worth about $7 million. Around 14000 August $39 puts were traded, which was more than 20 times the existing Open Interest at that level. (Click to enlarge) The buyers of the put will only start to breakeven and earn a profit if crude oil prices fall below $39 per barrel within the expiry date of the options, which would require a further fall of 15 percent. But is this likely? Can crude oil fall that much? For four months, crude oil traders waited patiently to see the results of the OPEC production cuts. The compliance from OPEC and its allies has been much better than market expectations. However, the U.S. shale oil producers had […]

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