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Do Crude Prices Have Upper Limits?
UPI Energy Correspondent Washington (UPI) Aug 23, 2005 While some traders say they believe $75 per barrel is possible by December, others bet on crude reaching $100 per barrel before the end of the year. With oil hovering around $65 per barrel, crude prices have risen more than 50 percent since January, and 150 percent in the past almost three years. But how much higher can the price of a barrel go? Oil prices have been rising steadily, despite growing crude oil stocks and slower demand growth. Bullish traders use every bit of bad news as an opportunity to push prices higher. Bullish traders have been increasing in number recently, mostly due to tensions in the Middle East, speculative buying and expected high demand in the fourth quarter. The New York Mercantile Exchange's options market now predicts a one-in-three chance of prices moving above $75 per barrel before December, compared to a one-in-20 chance at the start of the year, according to Deutsche Bank analysts. A call option, which represents one futures contract, or the equivalent of 1,000 per barrels of crude oil, gives traders the right but not the obligation to buy at a specified price within a specified period in exchange for a one-time premium payment. If the price is never reached, traders lose the premium. If it is reached and the market continues to rise, the player is in the money. As a rule, large volumes of outstanding options on a certain price can act as a magnet once futures prices approach the options price. For the December light sweet crude contract on NYMEX, there are over 12,000 lots on the $80 per barrel call option. Total open interest in the NYMEX crude market rose more than 15 percent since August's onset, a sign that speculative money has been pouring in as new players try to ride the wave. All rights reserved. � 2005 United Press International. Sections of the information displayed on this page (dispatches, photographs, logos) are protected by intellectual property rights owned by United Press International. As a consequence, you may not copy, reproduce, modify, transmit, publish, display or in any way commercially exploit any of the content of this section without the prior written consent of United Press International. Related Links TerraDaily Search TerraDaily Subscribe To TerraDaily Express 
Interview: Vincent DeVito
Washington (UPI) Aug 22, 2005Although consumers feel the pinch at the pump and gas prices may continue to rise with the Labor Day weekend holiday approaching, President George W. Bush's drive to bring stability to the Middle East will ultimately lead to lower gas prices, Vincent DeVito, former Acting Assistant Secretary of the U.S. Department of Energy, told United Press International Monday.
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