Energy sector fundamentals point to an attractive IBKR ForecastTrader combination opportunity regarding US oil production. In my view, the “No” answer to the Contract asking, “Will US Oil Production exceed 13,800 thousand barrels per day for January 2025” and the “Yes” answer to the Contract asking the same question but with a 13,000 thousand threshold are likely to be correct. The first contract with the “No” answer is priced at $0.81 and the second contract with the “Yes” answer is priced at $0.83, representing a total cost of $1.64. If oil production follows its 11-month range, both would be correct, delivering $2 to the investor for the Forecast Contract combination.
Source: ForecastEx
Note: Prices are highest bids as of the morning of March 27, 2025.
Let me explain why I think both will be accurate: As shown below, domestic oil production, which is at record high levels, has exceeded 13 million barrels per day (13,000 thousand BPD) in all but two of the past 18 months but it has yet to exceed December’s peak of 13.49 million. Against that backdrop, President Trump is seeking to boost activities by rolling back regulations and opening additional land for oil drilling, a strategy that will likely bolster output incrementally over the long haul. Conversely, with WTI crude at just $69 per barrel, motivating many expansionary projects in the short term is a tall bar, as increased supply may lower prices and compress margins while large producers have shifted to an approach of returning cash flows to shareholders via stock buybacks and dividends rather than reinvesting profits towards capital expenditures. Meanwhile, sector executives may believe that regulatory relief is only temporary as future administrations could re-impose restrictions. The industry also faces a considerable labor shortage and limited spare capacity, considering that volumes are at a record. With those points in mind, it’s probable that oil production will increase, but in my view, it’s unreasonable to expect the January average to exceed 13.8 million BPD. Furthermore, the Energy Information Administration estimates production will average 13.5 million BPD this year. In conclusion, I like the two contracts mentioned above which I believe feature an attractive risk/return opportunity and settle this Monday, March 31.
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There is no reason to increase supply. To lower prices, it would make more sense to cut taxes on gasoline. I’d rather not worsen deficits nor encourage more fuel consumption.
Well, at this point oil is not concern. Trump’s policies are sinking the economy and international diplomacy to a point of no return. Where are all those people that said Trump was “pro-business”? Now we cannot find anyone. The US went from TINA to a sort of toxic, nazi, imperialist state that will have deep and long term negative consequences. I am shorting everything, especially Tesla. You still have time.