With the crude oil prices almost touching the three digit figure in 2007, speculations are rife in the International market that by the need of 2008 it would touch u.s.$200.
Though such a possibility according to market analysts is an extreme one, it has not desisted the speculators from betting on the commodity. There has been a tenfold increase in the number of options to buy oil on the floor of New York Mercantile Exchange in the past two months. The total number of contracts currently stands at 5533 a record high.
As option contract is a system for the investors to speculate on the prices. The uniqueness of this is that they need not keep them until the price hits the mark they have bet for. They exit by selling as the value increases.
However, what is the real possibility of the crude touching the 200 mark? According to Mr.kevin Norish, Director of Commodity Research at Barclays Capital, for such an eventuality to materialize, there has to be a’ massive supply shock’, say another war in the Middle East. However, he does not expect the market to touch this mark, despite the fact that the demand supply mismatch would continue. This is because of the weak supplies from OPEC and strong demand from U.S.A. and Asia. His bet is that the prices would hover around U.S.$87.40 on an average in 2008.
The consumers wish that his predictions remain a reality as with an increase in each cent of the product, a hole is dented in his/her budget. It is also a major cause for concern for parties in power, especially, a country like India wherein the price issues become a political cause for many a defeat. With elections round the corner, a stable oil price is very much in the wish-list of any politician
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