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E-Mini Crude Oil Futures Volatility Forecast (02/05/2011)

E-Mini Crude Oil futures moved higher even this week although we forecasted a bearish movement of the price. Specifically, the market opened at $ 112 rose to $ 113 and then closed to $ 113.7 on Friday.

The current volatility is 1.4% (22.2% annualised) and the TGARCH is displaying a quite stable volatility curve which is a pretty strange phenomenon for such a volatile market.

Moreover, the big rally in oil prices has been mainly caused by the sharp depreciation of the US dollar against the European currencies (particularly Euro and Pound Sterling) and therefore there is no, apparently, strong fundamental reason (such as a shortage of supply or an increased demand) which justifies such a boost in price.

The HyperVolatility team remains bearish on E-Mini Crude Oil futures because the volatility will tend to mean revert and explode in the upcoming days dragging down futures prices in the $109 – $ 110 zone.

Finally, such high oil prices will probably tend to decrease because a further augment could provoke a shrinking in the demand of oil and therefore a loss in terms of capital for the OPEC.

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