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How Volatile Have Crude Oil Price Movements Been?

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Crude oil price movement and volatility

Generally, WTI (West Texas Intermediate) volatility has been rising since June 20, 2014. US crude oil (USO) made a high of $107.26 on a closing basis before it started to decline. During February 2015, when crude was consolidating around $50, volatility rose to 66.6. After that, crude started to decline. It made a new low of $44.84 on a closing basis. During September 2015, when crude recovered from its yearly low of $30.73 on a closing basis, volatility rose to 66.4 before crude started to fall again. On September 30, Russian (RSX) forces engaged in the civil war in Syria after an official request by the Syrian government. At the beginning of 2016 when crude touched a 12-year low, volatility made a new a high of 86.28. In January 2016, Saudi Arabia executed a Shia cleric. This led to diplomatic tension between Iran and Saudi Arabia—two large crude oil producers. In January, the secondary sanctions on Iran were lifted.

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USO volatility and price movement analysis

USO is highly correlated with crude oil. Large investments moved out of the ETF since 2014 when crude oil also started falling. Currently, the volatility for USO and crude oil, although higher than in 2014 and on many occasions in 2015, isn’t in a situation where it indicates any sharp or sudden large move in crude oil or USO. However, this can change very quickly. Any news received by the Market than can cause a large move in prices. This can cause volatility to spike.

ETFs affected by crude volatility

Energy ETFs such as the S&P Equal Weight Energy ETF (RYE), the S&P Equal Weight Energy ETF (IPW), and the iShares MSCI Global Energy Producers ETF (FILL) take price cues from the movement of crude oil prices and its volatility.

Exploration and production companies such as Northern Oil & Gas (NOG), Kosmos Energy (KOS), and Denbury Resources (DNR) are also impacted by these developments.

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