Oil’s plunge is bringing some excitement back into the market.
As futures in New York slipped to the lowest since OPEC’s output deal in November, options trading surged and signaled the biggest bias toward a price decline in six weeks. That’s a stark departure from last month, when the West Texas Intermediate benchmark traded at the narrowest price band since 2003.
Futures had been trading between about $50 and $55 a barrel this year as the Organization of Petroleum Exporting Countries and 11 other major producers implemented historic supply cuts to help rebalance the market. But shale producers aren’t helping. A drilling revival in regions like the Permian Basin of West Texas and southeastern New Mexico has pushed U.S. crude inventories to record highs, and production topped 9 million barrels a day.
WTI for April delivery slumped 2 percent to settle at $49.28 a barrel, the lowest level since November 29. On Wednesday, the U.S. benchmark broke below the 100-day moving average, a key technical level, also for the first time since late November. Futures are down 7.6 percent this week.
Options on WTI saw 570,934 lots traded as of 5:01 p.m. in New York, set for the second-highest volume ever, according to preliminary data compiled by Bloomberg. WTI crude futures volume was at about 1.57 million on Thursday, following 1.76 million on Wednesday. The most-active WTI options traded Thursday include April $50 calls, April $48 puts, April $51 calls, April $55 calls and April $47 puts.
For now we would say keep your powder dry but watch this space.
The Pinstripe and Bowler Club shares information with MF Solutions Ltd