NEW YORK (TheStreet) -- The volatility in Brent oil options indicates that Brent oil is poised to drop to about $31 per barrel, Bank of America Merrill Lynch reiterated in a note to investors today. WHAT'S NEW: The volatility implied by at-the-market Brent oil options "continues to increase at alarming speed," Bank of America Merrill Lynch analyst Francisco Blanch wrote in a note to investors today. Consequently, the analyst, who first noted this trend in a January 6 note, continues to expect Brent oil to decline to $31 per barrel and West Texas Intermediate oil to sink to $32 per barrel. Blanch has become even more pessimistic about the outlook for oil prices since January 6, since contango in the brent market is reaching levels last seen in 2009, he wrote. Contango is a situation in which the futures price is above the expected future spot price. The high level of contango indicates that oil inventories all over the world are increasing very quickly, the analyst stated. The increased inventories, in turn, will exert downward pressure on oil prices, the analyst contended. STOCKS TO WATCH: Major publicly traded oil companies include BP , Chevron , ConocoPhillips , Exxon Mobil , Royal Dutch Shell and Total . The major players in the oil services space are Halliburton , which is in the process of acquiring Baker Hughes , and Schlumberger . Reporting by Larry Ramer.
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