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Near Term Brent Call Volatilities Back at Parity with Puts

OIL OPTIONS

The near term crude option call skews have pulled back to near parity with the puts, reflecting the reducing upside risk currently pricing into the market.

  • The 25 delta implied volatility skew briefly turned back in favour of the puts late yesterday but call volatilities have regained ground today as futures prices rallied.
  • Conflict in the Middle East has so far had no impact on physical oil supplies from the region while global demand growth uncertainty and spare OPEC+ capacity are also helping to limit upside pressures.
  • The Brent crude second month 25 delta call-put skew is currently around +0.05% and the WTI second month skew is about -0.3%.
  • The crude Dec24 call-put skews have widened since mid April with Brent back to -2.6% from as narrow as -1.4% on April 16. The Dec24 WTI skew is back at -3.1% from -2.3% on April 15.
    • Brent JUN 24 up 0.8% at 87.66$/bbl
    • WTI JUN 24 up 0.7% at 82.47$/bbl
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