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How the Rise in Oil Could Affect Your Energy Investments

PART:
1 2 3 4 5
Part 4
How the Rise in Oil Could Affect Your Energy Investments PART 4 OF 5

Will US Crude Oil Get Back to the $47 Level Next Week?

US crude oil

On August 31, 2017, US crude oil (USO) (OIIL) (USL) active futures’ implied volatility was 27.2%, which was 0.4% above its 15-day moving average.

Will US Crude Oil Get Back to the $47 Level Next Week?

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US crude oil futures’ prices and implied volatility generally move in opposite directions. For example, in the trailing week, US crude oil active futures fell 0.4%, while the implied volatility rose 2.1%.

On February 11, 2016, the implied volatility rose to 75.2%. In fact, on the same day, US crude oil active futures fell to their 12-year low. Since then, implied volatility has fallen 63.8%, and the US crude oil active futures have risen 80.1%.

Price forecast

In the next seven days, US crude oil active futures could close between $45.45 and $49.01 per barrel with a probability of 68%. This is assuming prices are normally distributed and based on crude oil’s implied volatility of 27.2% for this calculation.

The $49 level

If US crude oil gets back to the $49 level, it could drive equity indexes such as the S&P 500 Index (SPY) and the Dow Jones Industrial Average Index (DIA) higher. We discussed the impact of a recovery in oil prices on these equity indexes in part two of this series. Moreover, it could also be a positive development for energy ETFs such as the Fidelity MSCI Energy ETF (FENY) and others.

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