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Crude Oil Could Impact Your Energy Investments

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Part 4
Crude Oil Could Impact Your Energy Investments PART 4 OF 5

Will US Crude Oil Fall below $47 Next Week?

US crude oil

On August 24, 2017, US crude oil futures’ implied volatility was 26.6%—0.7% below its 15-day rolling average.

Will US Crude Oil Fall below $47 Next Week?

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Usually, oil (DBO) (USO) prices and their implied volatility move inversely. For example, on February 11, 2016, US crude oil futures fell to a 12-year low. On the same day, the implied volatility rose to 75.2%. Since then, oil prices have recovered 81%, while the implied volatility fell 64.6%. On June 20, 2014, US crude oil active futures settled at their pre-crisis high. On the same day, the implied volatility was just 16%. From June 20, 2014, to August 24, 2017, US crude oil prices have fallen 55.8%, while the implied volatility rose 66.4%.

Price forecast

Assuming that prices are normally distributed, there’s a 68% probability that US crude oil active futures could close at $45.68–$49.18 per barrel in the next seven days. The calculation is based on crude oil’s implied volatility of 26.6% and a standard deviation of one.

If US crude oil moves below $47 

If US crude oil prices broke below $47, energy ETFs such as the Fidelity MSCI Energy ETF (FENY) and others would be impacted negatively. It would also impact equity indexes such as the S&P 500 Index (SPY) and the Dow Jones Industrial Average Index (DIA) because of their exposure to energy stocks.

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