Energy markets pushed to lows not seen since January 2007 last week as the dollar continued its rally amidst the global financial turmoil. Producer hedgers who took advantage of cheap downside puts when crude oil was trading in the $90 range have now begun to roll their positions down to the $30 level. WTI February American-style $30 puts are currently offered as low as $700 per 1000 barrels.
Traders may once again take more notice of Opec, as the cartel has once again called an emergency meeting, this one scheduled for November 29th in Cairo. The group is expected to announce further cuts in production, possibly as much as 1.5-2m barrels per day on top of the 1.5m barrels already announced.
Consumer hedgers looking to protect against an Opec-inspired price spike should look to the WTI December Asian-style $65/85 call spread, currently offered at about $2,250 per 1000 barrels. That's $2,250 of maximum risk with a possible payout of $17,750. The buyer of the call spread would profit on a short-term price spike- thus providing cheap protection against a near-term bounce higher.
Singapore, 16:00
Sunday, November 16, 2008
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