Oil traders see crude oil prices plunging soon, as the world economy isn’t rebounding strongly enough to dent a huge supply glut.
Bloomberg reports that traders are paying more than ever in the options market to protect against such a price drop.
The gap between prices of options that would benefit from a drop and those that would profit from a rise in oil prices have widened to a record 10 percentage points, according to five years of data compiled by Banc of America Securities-Merrill Lynch and cited by Bloomberg.
U.S. crude stockpiles have jumped 14 percent larger than a year ago, and OPEC is pumping 600,000 barrels a day more than the world needs, according to the International Energy Agency.
“If ever there was going to be a retreat below $60 a barrel, it is now,” Stephen Schork, a renowned oil economist told Bloomberg.
“It was a very weak summer. We came out with more gasoline than we started.”
Euphoria over world economic recovery has sent oil soaring 62 percent so far this year, to $72 a barrel.
Another oil guru Phil Verleger is even more bearish than Schork.
“There’s all this heating oil with no place to go,” Verleger told Bloomberg. “I’m fairly certain we’ll see (crude) prices in the $30s this year.”
Not everyone sees it this way. Oil legend T. Boone Pickens recently told Dan Mangru of Moneynews.com that crude could go 10 times higher, to $300 a barrel, at least in the longer term.
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