On February 22, 2018, US crude oil’s implied volatility was at 21.7%—6.5% less than its 15-day average.
Often, oil prices and implied volatility move divergently. Since US crude oil’s 12-year low in February 2016, the implied volatility slipped 71.2%, while US crude oil active futures gained 139.5%.
Is $65 possible next week?
On February 23–March 1, 2018, with a 68% probability, US crude oil futures could close between $60.88 and $64.66 per barrel based on crude oil’s implied volatility of 21.7% and assuming that prices are normally distributed.
On February 22, 2018, US crude oil futures closed at $62.77 per barrel. So, US crude oil prices near $65 could boost ETFs like the United States Oil ETF (USO), the ProShares Ultra Bloomberg Crude Oil (UCO), the United States 12 Month Oil (USL), and the PowerShares DB Oil ETF (DBO). In the trailing week, US crude oil prices rose 2.6% and these ETFs performed as below:
- USO rose 1%
- UCO rose 4.9%
- USL rose 2.8%
- DBO rose 2.9%