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Crude Oil: How It Influences Your Energy Investments

PART:
1 2 3 4 5
Part 4
Crude Oil: How It Influences Your Energy Investments PART 4 OF 5

US Crude Oil: Is $50 Possible Next Week?

US crude oil’s implied volatility

On September 7, 2017, US crude oil’s implied volatility was 26.9%—0.4% below its 15-day moving average.

US Crude Oil: Is $50 Possible Next Week?

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US crude oil’s implied volatility and prices generally move inversely. In the last four trading sessions, the implied volatility fell 1.1%. US crude oil (USL) (OIIL) (UCO) October futures rose 3.9% during this period. On February 11, 2016, crude oil’s implied volatility rose to 75.2%. On the same day, US crude oil prices fell to a 12-year low. Between February 11, 2016, and September 7, 2017, US crude oil prices rose 87.3%, while the implied volatility fell 64.2%.

Next seven days

In the next seven days, US crude oil October futures could close between $47.26 and $50.92 per barrel. The price forecast is based on the following inputs and assumptions:

  • chance of prices closing within this range is 68%
  • prices are normally distributed
  • crude oil’s implied volatility of 26.9%

If US crude oil prices move above the $50 mark, it could impact equity indexes such as the S&P 500 Index (SPY) and the Dow Jones Industrial Average Index (DIA), which we discussed in Part 2. Energy ETFs like the Fidelity MSCI Energy ETF (FENY) and others could take important cues from oil prices.

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