Where Will US Crude Prices Settle?
On June 15, 2017, US crude oil active futures’ implied volatility was 27.9%.
Jun. 20 2017, Updated 9:36 a.m. ET
US crude oil’s implied volatility
On June 15, 2017, US crude oil active futures’ implied volatility was 27.9%. The number is currently 6.4% below its 15-day average.
On a week-over-week basis, US crude oil (DBO) (OIIL) (USL) futures’ implied volatility fell 9.5%. During this period, US crude oil active futures tumbled 2.6%. In part one of this series, we discussed the factors that impacted oil prices between June 8 and June 15, 2017. However, the two have broadly had an inverse relationship in the past, as seen in the image above.
Crude oil’s implied volatility peak
On February 12, 2016, crude oil active futures’ implied volatility climbed to 78.4%. Since then, their implied volatility has dropped 64.4%. US crude oil active futures rose 51.1% during this period. Notably, on February 11, 2016, US crude oil active futures settled at a 12-year low.
Crude oil price forecast
In the next seven days, crude oil active futures could settle between $42.74 and $46.18 per barrel. The assumption is based on a normally distributed bell curve with the following parameters:
- standard deviation: 1.0
- implied volatility: 27.9%
On June 15, 2017, crude oil active futures settled at $44.46 per barrel. If the current bearish sentiment continues, crude oil active futures could fall below the $43 mark. US crude oil below the $43 mark could impact energy ETFs such as the Fidelity MSCI Energy ETF (FENY) and the ProShares Ultra Oil & Gas ETF (DIG).
