Oil Can Fall to $85 in Next Two Months: Gurka

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March 17 (Bloomberg) -- Bloomberg's Alix Steel, Greg Bender, and Michael Gurka, managing director at Spectrum Asset Management, put futures in focus with a look at oil in "On The Markets" on Bloomberg Television's "In The Loop." (Source: Bloomberg)


A huge selloff in copper.

Also an oversupply in the u.s.. what is the real reason behind it?

Outside of the ukraine, you have people watching the dollar go lower.

Good for gold, but crude oil and copper that have not been reacting positively.

An underlying weakness or just lack of demand overall.

They're also in maintenance and the u.s., so there is a little bit of light usage there.

I want to get your trade here.

Creswell will happen here, i mentioned even today as we speak, some of the sanctions could be spilling into the market and we could have a major oversupply to our future markets.

The front month crude oil right now in trading, 98. you go out one month to make, it is 89. we could see four dollars to five dollars lower for crude in those regions.

I want to risk what i pay for those reasons.

Right now, you will start seeing a higher price than you will in the state.

Class is 95 your target?

I think it is a good target for the front month and if you go one month below that, 85. below those levels there, i start taking profits because that is one heck of a run.

Let's look at the trade in terms of real dollars.

It is in dollars per barrel -- each contract represents 1000 barrels.

Oil is trading around 9850 per barrel.

Close that position and 95, that is a profit of three dollars and $.50 per barrel.

Since each future is contact -- contract for 1000 barrels, a total profit.

$3500 for every contract.

Michael is betting on -- contract that for the oil futures price.

Qwest michael was very specific talking about looking at how the concepts are trading against each other.

He is not only looking at the buy-in but the open interest of the contract.

An open contract of the buyer and seller.

Right now, we have crude oil expiring off the board.

Traders look at the change, especially sudden change in the open interest levels to know there is money flowing in and out of the contract.

Crack speaking of, looking at may oil futures, but april is the active contract.

Explain that.

It is the one doing the most volume and or the one with the highest interest.

You have april expiring so the open interest is less than may.

But the volume is higher because exploration is driving activity.

They will keep a close eye on how that works.

Class thank you.

And michael, thank you for your bearish trade on oil.

We're back in 30 minutes.

"market makers" is next.


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