Where Will US Crude Prices Settle?

On June 15, 2017, US crude oil active futures’ implied volatility was 27.9%.

Rabindra Samanta - Author
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June 20 2017, Updated 9:36 a.m. ET

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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.

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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).

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