Energy markets mirrored equities once again yesterday as WTI crude oil pushed below the $50 level. The front-month contract has now fallen almost $100 in only 4 months in the face of crashing world-wide demand, no short-term supply problems, still elevated stock and inventory levels, depleted investor positions and renewed shorting by hedge funds.
First quarter 2009 puts continue to attract attention from both producer hedgers and traders. Using Asian options, the WTI Q109 $30 puts are still trading at relatively cheap levels, only about $600 per 1000 barrels of crude. For more immediate downside protection, producers can look to the Q109 $35/45 put spread strip. Currently trading around only $2,500 per month per 1000 barrels, this hedge offers a total payout of $22,500 at or below $35.
Singapore, 09:00
Thursday, November 20, 2008
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