Stable Oil prices on robust economy and OPEC cuts, traders prepare for potential drop in market

Oil prices - Investors Mart

On Wednesday, oil prices held firm acquiring support from a strong economic growth and the output cuts led by a collection of producers from OPEC and Russia.

The global benchmark from oil prices, spot Brent crude oil futures, settled at $70 per barrel at 0102 GMT gaining 4 cents from their last trade close to their January 15 three year peak of $70.37.

United States West Texas Intermediate (WTI) crude futures were up 12 cents from their last close and hit $64.59 per barrel not far from their December 2014 peak of $64.89 from January 16.

According to a survey issued on Wednesday, the newest indication of a strong international economic expansion was seen in Japan’s manufacturing activity which grew at its fastest pace in about four years in the month of January.

Economic expansion clearly translates into strong oil demand growth, due to the timely supply restrictions of Russia and countries that are affiliated with OPEC with the goal of tightening the market and pulling up prices. The deal to cut oil output began in January and is expected to last through 2018.

In spite of general supportive market conditions, which resulted into crude futures rallying by about 15 percent since early December, there are some indications that traders are getting ready for a potential downward movement.

Traders are considering to take out put options on crude futures contracts and put them on sale at a certain price.

Trading data indicates that open interest for Brent put options which are to be sold at $68, $69 and $70 per barrel has increased since the middle of the previous week in the International Exchange (ICE).

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