Dec. 5 (Bloomberg) -- Bets that oil for January delivery will fall below $20 a barrel were the most active options contract in electronic trading today, a day after Merrill Lynch & Co. said oil may drop to less than $25.

Oil may dip to a six-year low if the worldwide recession spreads and the Organization of Petroleum Exporting Countries fails to stem declines, Francisco Blanch, Merrill commodity strategist, said in a report yesterday.

“Under a number of circumstances including a recession in China and a failure from OPEC to cut enough output, we could see prices dipping all the way to $25 a barrel, which is the level at which we’ll destroy some non-OPEC supply,” Blanch said in an interview today. “We’re not forecasting that. We’re saying it might happen.” His 2009 forecast is for $50 a barrel.

January $20 puts rose 3 cents to 4 cents a barrel, or $40 a contract, according to electronic trading data as of 3:25 p.m. on the New York Mercantile Exchange. Volume was 743 contracts. Floor trading settled unchanged at 1 cent a barrel, or $10 a contract. Today’s pit volumes will be released Dec. 8. The contract didn’t trade yesterday, according to data today.

Open interest was 291 contracts yesterday, the date for which the most recent figures are available. That’s unchanged from the day before.

Crude oil for January delivery lost $2.86, or 6.6 percent, to settle at $40.81 a barrel at 2:51 p.m. on the Nymex. Earlier, it touched $40.50, the lowest since December 2004, on concern demand will drop after a report showed U.S. employers cut jobs in November at the fastest pace since 1974.

Futures posted their biggest weekly drop since the Persian Gulf War in 1991. Oil prices have tumbled 72 percent since reaching a record $147.27 on July 11.

January $50 Calls

Today’s second-most active options contract in electronic trading was January $50 calls, or bets the price will rise above that level.

The contract fell 48 cents to 56 cents a barrel, or $560 a contract, in electronic trading. The contract fell 49 cents to 55 cents in floor trading. Electronic trading volume was 686 lots, up from 542 yesterday. Volume was 1,759 contracts yesterday when floor trades were added in. Open interest rose to 4,392 yesterday from 3,785 the day before.

Bets that oil for June delivery will fall below $35 a barrel were the most active options contract on the exchange yesterday, according to floor-trading data released today.

The June $35 put contract rose 57 cents to $2.16 a barrel, or $2,160 a contract. Volume was 10,164 lots, up from 3,300 on Dec. 4. Open interest more than tripled to 13,356 contracts yesterday from 4,006 the day before.

December 2012

Bets that oil for delivery in December 2012 will fall below $60 and $75 a barrel were the second- and fourth-most active contracts on the exchange yesterday, according to today’s data.

December 2012 $60 put options rose 59 cents to $7.03 a barrel, or $7,030 a contract, on volume of 7,800 shares. Open interest climbed to 8,250 lots from 450 the day before.

December 2012 $75 put options rose 86 cents to $14.03 a barrel, or $14,030 a contract, on volume of 3,900 lots. Open interest soared to 5,100 contracts yesterday from 1,651 the day before.

December 2012 futures fell $2.82, or 3.7 percent, to settle at $73.60 a barrel today. Yesterday, they lost $1.05, or 1.4 percent, to $76.42 a barrel. The contract has fallen 9.8 percent since the U.S. Thanksgiving holiday last week, compared with a 14 percent decline in the most-active January 2009 contract.

January 2009 $40 put options, the third-most active contract yesterday, rose 60 cents to $1.49 a barrel, or $1,490 a contract on volume of 4,434 lots. Open interest was 10,186 lots yesterday, down from 10,880 the day before.

One options contract equals 1,000 barrels of oil.

To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net.

Last Updated: December 5, 2008 16:21 EST