heading south

OIL & gas Heading Lower . Despite AWE being a 'good' 2nd tier company it will follow oil just like woodside

Oil at $$25 AWE at $1.25-$1.50??

Bets Oil to Drop Below $25 for January Delivery Rise in Volume
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By Margot Habiby

Dec. 5 (Bloomberg) -- Bets that oil for January delivery will fall below $20 and $25 a barrel gained in volume in electronic trading today, a day after Merrill Lynch & Co. said oil may drop to less than $25 in 2009.

Oil may dip to the lowest price in six years if the worldwide recession spreads to China and the Organization of Petroleum Exporting Countries fails to stem declines, Francisco Blanch, Merrill commodity strategist, said in a report yesterday.

“Potentially, under a number of circumstances including a recession in China and a failure from OPEC to cut enough output, we could see prices dipping all the way to $25 a barrel, which is the level at which we’ll destroy some non-OPEC supply,” he said in an interview today. “We’re not forecasting that. We’re saying it might happen.” His 2009 forecast is for $50 a barrel.

January $20 puts rose 4 cents to 5 cents a barrel, or $50 a contract, according to electronic trading data as of 12:49 p.m. on the New York Mercantile Exchange. January $25 puts, bets that the price will fall below that level, rose 6 cents to 7 cents a barrel, or $70 a contract.

Both January $20 and $25 puts were among the 10 most active options contracts, with electronic trades of 202 and 121 lots, respectively. Today’s pit volume data will be released Dec. 8. There was one trade in January $25 puts yesterday and none among the $20 puts.

Futures Fall

Crude oil for January delivery lost $2.34, or 5.4 percent, to $41.33 a barrel as of 1:05 p.m. on the Nymex. Earlier, it touched $40.81, the lowest since December 2004, on concern demand will drop after a report showed U.S. employers cut jobs in November at the fastest pace since 1974.

Futures are heading for their biggest weekly drop since the Persian Gulf War in 1991. Oil prices have tumbled 72 percent since reaching a record $147.27 on July 11.

Today’s most-active options contract in electronic trading was January $50 calls, or bets the price will rise above that level. The contract fell 53 cents to 51 cents a barrel, or $510 a contract, on volume of 627 lots. Volume was 1,759 contracts yesterday, when open interest rose to 4,392 from 3,785 the day before.

Bets that oil for June delivery will fall below $35 a barrel were the most-active options contract on the exchange yesterday, according to floor-trading data released today.

The June $35 put contract rose 57 cents to $2.16 a barrel, or $2,160 a contract. Volume was 10,164 lots, up from 3,300 on Dec. 4. Open interest more than tripled to 13,356 contracts yesterday from 4,006 the day before.

December 2012

Bets that oil for delivery in December 2012 will fall below $60 and $75 a barrel were the second- and fourth-most active contracts on the exchange yesterday, according to today’s data.

December 2012 $60 put options rose 59 cents to $7.03 a barrel, or $7,030 a contract, on volume of 7,800 shares. Open interest climbed to 8,250 lots from 450 the day before.

December 2012 $75 put options rose 86 cents to $14.03 a barrel, or $14,030 a contract, on volume of 3,900 lots. Open interest soared to 5,100 contracts yesterday from 1,651 the day before.

January 2009 $40 put options were the third-most traded contract yesterday, rising 60 cents to $1.49 a barrel, or $1,490 a contract on volume of 4,434 lots. Open interest was 10,186 lots yesterday, down from 10,880 the day before.

One options contract equals 1,000 barrels of oil.

To contact the reporter on this story: Margot Habiby in Dallas at [email protected].
Last Updated: December 5, 2008 13:07 EST