Nymex WTI crude futures have been stubbornly trading around the $70 per barrel mark since about June this year, proving a number of bullish calls from the start of the year correct.
Nevertheless, if options pricing is anything to go by, the market might be anticipating more of a downside move in the weeks to come.
As Addison Armstrong, director of market research at TFS Energy observed in his Monday note (our emphasis):
Oil traders are paying the most ever in the options market to protect against a drop in crude prices. The price differential between betting on a decline and those who would profit from a rise in oil widened to a record 10 percentage points, according to five years of data compiled by a Banc of America Securities Merrill Lynch [sic]. Put options for December below current prices have a volatility of 54.3 percent, compared with 43.3 percent for call options.
Related links:
Fears grow over storage and product overhang – FT Energy Source
A very bullish oil presentation from Goldman – FT Alphaville
Distillate overhang – FT Alphaville