Oil Options at $50

[ben_meyers]

Oil Options at $50 Soar After OPEC Cut Fails to Support Prices

Oct. 24 (Bloomberg) -- Oil options contracts to sell crude at $50 by December almost tripled today after an OPEC decision to slash production failed to allay concerns that the global economic slump is hurting demand.(snip)

''It certainly seems to me that we could get down to $50 a barrel,'' Adam Sieminski, Deutsche Bank's chief energy economist, said in a Bloomberg Radio interview today. ``You could look at the OPEC cut as a sign of weakness, not strength.''

The cost of the option jumped on speculation that an output cut announced today by the Organization of Petroleum Exporting Countries, which supplies about 40 percent of the world's oil, won't be enough to stem plunging prices.

OPEC decided at its Vienna headquarters today to lower the production quota for 11 of its members by 1.5 million barrels a day, to 27.308 million barrels a day, starting from Nov. 1.

Crude oil futures for December delivery dropped as much as $5.19, or 7.7 percent, to $62.65 a barrel in electronic trading on Nymex, and traded at $64.51 a barrel at 9:59 a.m. local time.

http://www.bloomberg.com/apps/news?pid=20602099&sid=aL7sq8rLAHcg&refer=energy
Reminds me of the late 80's when oil topped out at over $40 and then dropped to $7. Soon they will be capping wells and parking their tankers offshore.

[Uben]

1. Yeah, I remember

I worked for a wireline company in the eighties. We plugged hundreds of wells abandoned by the majors. Those wells producing less than 10-15 bbls a day were givin up. The guy I worked for, a friend since childhood, has become a multi-millionaire by reworking those wells and pumping them.

[DJ13]

2. The OPEC idiots got too greedy

They allowed oil to be speculated up to near $150 (I say allowed because they have more than enough money to have outspent the speculators in the market to create price stability when it went too high too fast in the Spring), but in their love of selling their $15 to market product for 10x cost they forgot the lessons of the past about demand destruction high prices can create.

[Leopolds Ghost]

4. $150 is the natural market price. $50 is the sign of a deep economic downturn.

We hit peak oil two years ago, you know. They are pumping less of it than they did two years ago. Oil demand only drops in a deep depression.

Also, the price of oil fluctuates by a dollar or more between summer and winter. The winter downturn is expected.

[dkofos]

3. That's good news for the economy.