Downside Crude Skew Increasing As Crude Futures Rally

The premium to cover downside Brent moves has increased slightly this week as crude futures have rallied on optimism for oil demand but with ongoing recession concerns. The second month Brent call-put skew has drifted slightly lower with the puts now at a 4.15% premium to the calls.

• The second month Brent call-put skew had closed to around -3.25% on 23 Jan before gradually falling during the week. The skew was as close as -1.78% in the middle of December following the introduction of the EU ban on Russian crude. The WTI second month call-put spread is approximately -4.6% down from -3.95% last week.
• The Brent Dec23 call-put skew has also declined to nearly -5.7% and the WTI Dec23 skew is steady at around -6.7%.
• The gradual decline in crude ATM implied volatility has continued with second month volatility down to around 38.1% for Brent and 39.1% for WTI. Brent levels have fallen from around 46% at the start of the year.
  • Brent MAR 23 up 1.5% at 88.8$/bbl
  • WTI MAR 23 up 1.6% at 82.33$/bbl

Source: Bloomberg