On the back of the dramatic fall in the price of oil, traders are now taking bets that crude will fall as low as $20 a barrel according to a report in The Times.
The price of oil has now hit a six year low, after tumbling by more than 50 per cent since June. Brent is currently exchanging hands for $46.10 per barrel and WTI for $45.31, after the North Sea and US benchmarks slipped 1 per cent further today.
The Times reports that oil traders are betting that crude prices will hit a 20-year low of $20 a barrel as prices continue to fall and as Gulf producers stood firm on their plan to take on shale drillers in the US.
According to Nymex, the New York exchange, the level of contracts or options to sell US crude at $20 in June has rocketed from almost nothing to 13 million barrels of oil.
The numbers highlight just how bearish sentiment has become towards black gold, given that at the start of December, the most pessimistic move was the quadrupling of the number of options to sell 880,000 barrels of US crude at $40 for December 2015 in the space of a fortnight. The scenario suggested that investors felt prices would bottom out just below $40 by the end of the year.
As the price per barrel continues to fall, oil exchange traded products have also witnessed inflows hit a four-year high.
ETF Securities associate director, research, Nitesh Shah says: “Continued oil price declines drove further rounds of bargain hunting last week, with WTI and Brent oil ETPs seeing their highest weekly inflows since 2011.
“We believe that oil prices at these levels are unsustainable. Although OPEC resisted calls to cut production in November, highlighting the need for oil prices to find a new equilibrium, we believe the cartel will eventually have to reduce supply to help stabilise global oil prices. Demand for cyclical commodities, including oil, could rise this year as economic growth continues to improve. “