Oil’s 2-Month Drop Leaves Traders With Worthless Bets

Nov. 21 (Bloomberg) — Crude oil may extend a two-month decline as concern about shortages eases, leaving traders who bet on $100 oil with near-worthless investments.

“People who have put out extreme price scenarios have become very quiet,” said Craig Pennington, the head energy analyst at Schroders Plc in London, which manages $206 billion in assets.
Exxon Mobil Corp. Chairman Lee Raymond told a U.S. Senate hearing on Nov. 9 that prices have probably peaked. Boone Pickens, a Dallas hedge fund manager who more than a year ago predicted oil would reach $60, says he expects prices to drop toward $50 a barrel as record prices lead to lower demand.

Crude oil for January delivery traded at $57.80 a barrel in New York at 8:21 a.m. London time. That’s down 18 percent from a record $70.85 a barrel in August, when Hurricane Katrina struck the U.S. Gulf coast and shut down about a fourth of U.S. oil and gas production. Hurricane Rita in September further damaged rigs and refineries.

Hedge funds, often blamed for soaring prices, have their biggest bet against oil in 2 1/2 years, selling $3.2 billion of futures contracts in New York, according to data from the Commodity Futures Trading Commission. Lower prices are easing pressure on bankrupt airlines such as Delta Air Lines Inc., while signaling an end to surging profits at the oil companies.

Bloomberg