Crude Volatility Drifts Lower Despite OPEC Cuts

Crude oil volatility continues to ease lower despite the surge in futures prices following the OPEC production cut announcement. Crude prices have remained relatively stable this week since the initial surge higher with concern for weak global demand offsetting the upside supply pressure.

• Second month ATM Brent implied volatility is down at 36.5% from a high of 47.8% in mid March and WTI is down to 37.6% from 51.3%.
• The lack of further price swings and muted volatility reaction is potentially a sign that OPEC’s aim to reduce the market speculation and selling pressures from the wider market is working in the short term.
• The Brent and WTI second month 25 delta call-put skews are both hovering around -5.7% and relatively unchanged in the last couple of days.
• The Brent Dec23 skew continues to drift lower driven by global economic concern and uncertainty over the China recovery. The Brent Dec23 skew is down to -6.2% and WTI is down at -7.8%.
  • Brent JUN 23 down -0.3% at 84.72$/bbl
  • WTI MAY 23 down -0.2% at 80.51$/bbl

Source: Bloomberg