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Open interest reaches new highs

Bets that crude oil prices would fall below $25 per barrel in March reached an all-time high today.

It is impossible to say exactly where oil prices will be two months from now, but if the open interest, or the amount of total contracts outstanding, for puts on West Texas Intermediate is any indication, the answer is somewhere below $25 per barrel.

ECI WTI Puts March

The premium on the $25 puts was $0.24, meaning those putting their money on WTI falling further expect that they will breakeven at $24.76 in March. The puts expire on February 17.

WTI have been under continued pressure from an oversupplied market. The Department of Energy reported a crude oil build of 3.98 MMBO last week, bringing total U.S. crude oil inventories to 486,537 MMBO.

$20 crude already a reality in some markets

While WTI prices could test the $25 limit sometime in the near future, sub-$20 crude oil is already a reality for several producers. Several grades of crude oil around the globe, including North Dakota Sweet and Canada’s benchmark Western Canadian Select are already selling at $20 per barrel or less.

$20 oil

What Oil & Gas 360® readers predicted for 2016 oil prices

In December, Oil & Gas 360® conducted a survey of industry executives and energy investors. We asked respondents to predict commodities pricing for 2016, as well as U.S. CapEx, global demand and U.S. production for the year ahead.

The majority of all respondents — 55% — said that for most of 2016 they believed oil would trade in the $40 to $50 range. The Oilservice sector respondents were split between $40 to $50 per barrel (40% of the group) and $30 to $40 per barrel (also 40%). But more on the OilService side believed prices would return to higher levels in 2016; 18% said $50 to $60 WTI was coming in 2016, compared to only 9% of the E&P crowd. On Dec. 17, when the survey was launched, WTI traded a low of $34.53.


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