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Crude implied Volatilty Falls to Lowest Since Early 2022

OIL OPTIONS

Crude ATM implied volatility has resumed the gradual decline in recent days with Brent second month falling from around 39.8% on 6 Feb to 37.2% today. WTI second month implied volatility is down to the lowest since Jan 2022 at 38.0%.

  • The downside puts skew has held relatively stable for the last few weeks. The second month Brent call-put skew is current at -3.2% having bounced between -4.25% and -3.1% since the start of the year. The WTI second month skew has edged closer to -3.4% in recent days as the futures prices have rallied.
  • The longer dated crude call-put spreads have been gradually closing with optimism for a demand recovery in the second half of this year. Supply disruptions due to the EU ban on Russian crude has not materialised as anticipated but any impact due to the recent oil product ban is still an upside risk. Brent Dec23 skew has closed to around -4.4% and the WTI Dec23 skew is at -5.3%.



Source: Bloomberg

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