Where US Crude Oil Could Head in the Next Week

On April 4, US crude oil’s implied volatility was 22.6%, 10.3% below its 15-day average. Usually, lower implied volatility supports oil prices. The below 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 ~136.9%. Crude oil’s implied volatility has fallen ~70% since February 11, 2016.

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Between April 5 and April 12, US crude oil futures should close between $60.63 and $63.57 per barrel 68.0% of the time. The forecast is based on crude oil’s implied volatility of 22.6% and assumes a normal distribution of prices. On April 4, US crude oil May futures fell 0.6% and settled at $62.1 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 are 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 4.7%, UCO rose 9.4%, and USL rose 3.7%.