Analyzing US Crude Oil’s Price Forecast

On April 11, US crude oil’s implied volatility was 23.1%, which is 5% below its 15-day average. Usually, lower implied volatility supports oil prices. The following chart shows the inverse relationship between oil prices and oil’s implied volatility. Since reaching a 12-year low in February 2016, US crude oil active futures have risen ~142.6%. Crude oil’s implied volatility has fallen ~69.3% since February 11, 2016.

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On April 12–19, US crude oil futures should close between $61.86 and $65.30 per barrel 68.0% of the time. The forecast is based on crude oil’s implied volatility of 23.1% and assumes a normal distribution of prices. On April 11, US crude oil May futures fell 1.6% and settled at $63.58 per barrel.

Any changes in oil could be important for equity indexes like the S&P 500 Index (SPY) and the Dow Jones Industrial Average Index (DIA). The sentiment in oil and equity markets is often related.

These price limits could be important for oil-tracking ETFs like the ProShares Ultra Bloomberg Crude Oil ETF (UCO) and the United States 12-Month Oil ETF (USL). In the trailing week, US crude oil May futures rose 2.4%, UCO rose 5.4%, and USL rose 2.5%.