Options on US crude expire later on Tuesday, with open interest mostly gathered around put options, which give the seller the right, but not the obligation, to sell USA futures at both $40 and $45 a barrel.
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OIL prices turned away from early gains yesterday as the risk premium following the Paris attacks and the French air strikes in Syria faded, and traders began to focus on the global oversupply in crude and petroleum products again.
“The market is actively seeking storage solutions”, Mr Jefferies said in a note, but with January 2017 prices at about $6 a barrel above those for January 2016, the spread is too low to make floating storage attractive as freight costs still have to be included.
“Surprisingly, USA drillers are putting rigs back to work in the oil fields after more than two months”.
Crude oil advanced 0.81 per cent to Rs 2,849 per barrel at the futures market today as speculators indulged in widening positions, taking positive cues from Asian markets.
The net result is brimming crude oil stocks that offer an unprecedented buffer against geopolitical shocks or unexpected supply disruptions.
Did the Inventory Reports Cause Crude Oil Prices to Fall?
Crude futures tumbled earlier after the EIA data showed the eighth straight week in builds leaving inventories at 487.3 million barrels, within a hair of the April record of 490.9 million.
“Short term oriented traders may look to establish new bearish strategies”, said Jim Ritterbusch of Chicago-based oil consultancy Ritterbusch & Associates.
The EIA (U.S. Energy Information Administration) reported a rise of 4.2 MMbbls on November 12. Despite the sharp fall in oil prices, OPEC has refused to cut production which would support prices, opting instead to keep pumping at record levels (exceeding the group’s production ceiling of 30 million barrels a day).
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Crude oil has been soft for quite a few time, bolstered by a worldwide supply glut, and weak economic outlook in the Far East. On the NY Mercantile Exchange, West Texas Intermediate futures were trading up 0.5% at $41.92 a barrel. Front-month Brent crude is now trading at around $44 per barrel. In addition, a new policy brief from the American Council for Capital Formation concluded that allowing crude oil exports could provide an opportunity for the U.S.to strengthen the global energy market, easing current tensions with China and providing political and economic stability to the Asia Pacific – an area of great geopolitical concern.
