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Market Uncertainty and Low Liquidity Drive Crude Volatility Higher


Recent supply uncertainty has driven WTI front month implied atm volatility back up above 50% while the skew continues to favour the downside despite a rallying futures market.

  • An output reduction from CPC, protests in Libya and Iraq, OPEC member underproduction and changes to OPEC production targets to push volatility up from a low around 40% in August. New lockdowns in China have also added to the weak demand picture and price swings.
  • Every decreasing WTI aggregate open interest adds to market price swings and high volatility. Open interest is down to 1.47m from a peak over 2.5m last year.
  • The WTI Dec22 skew to the puts remains relatively unchanged at approximately -4%.
  • Brent NOV 22 up 4% at 96.72$/bbl
  • WTI OCT 22 up 3.7% at 90.06$/bbl

Source: Bloomberg

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