Market bets WTI to reach new 2015 low after Opec decision

New York: Bets that the price of US benchmark oil will fall below $38 a barrel in less than two weeks reached a record high after Opec decided to retain its production level.

Volume of West Texas Intermediate $38 puts, wagers that the price will fall below that level, increased about fivefold from this quarter’s daily average to more than 4,700 lots, according to exchange data compiled by Bloomberg. The puts expire on Dec. 16. Benchmark crude WTI closed at $38.24 on August 24, the lowest settlement this year.

WTI tumbled as much as $1.48 a barrel after the Organisation of Petroleum Exporting Countries, which accounts for about 40 per cent of world oil production, made no move to reduce production, which now exceeds 31 million barrels a day. US oil prices have slumped 25 per cent this year as Saudi Arabia led Opec to defend market share against higher-cost US shale companies.

“Opec’s current policy is to produce as much as they can,” said James Williams, an economist at WTRG Economics, an energy- research firm in London, Arkansas. “It’s adding pressure to oil prices. Their goal is to take out the growth of shale oil.”

WTI futures fell $1.07 to $40.01 a barrel at 1:48pm on the New York Mercantile Exchange after touching $39.60. January puts added 1 cent to 54 cents with volume of 4,752 lots, breaking the earlier daily record of 3,220 set on December 2. Volume has averaged about 890 a day since October 1. January puts from $35 to $40 made up six of the eight most-traded options.

Opec has pumped more than 30 million barrels a day the past 18 months, data compiled by Bloomberg show. The group produced about 31.4 million barrels a day in October, according to its market report.