E-Mini Crude Oil Futures Volatility Forecast (10/04/2011)

The last week we were expecting an ulterior rise of E-Mini Crude Oil futures prices and our profit target was set to be at $ 110. However, our quantitative analysis proved even more profitable because futures prices touched $ 113 on Friday.

The actual volatility is 1.48% (23.4% in annual terms) but the chart is displaying a situation which is quite steady, in terms of volatility fluctuations, and such a scenario seems stressing a probable further rise of futures prices.

Nonetheless, the rise would not be that powerful because once achieved the $115 – 115.5 area the volatility should increase and bring some sideways movements that would destabilise the price action.

The HyperVolatility team is moderately bullish on E-Mini Crude Oil futures but we believe that a retracement is on its way, hence, the more the market goes up the higher the instability. Even in this case the volatility curve is inevitably going to indicate the time to close out the long positions.

Furthermore, the tensions in Libya are still generating concerns amongst investors but extremely high oil prices could irremediably shrink the demand and we think that the OPEC will act in order to prevent this from happening. Finally, the depreciation of the US dollar acted as a catalyst in the recent rally and a short term depreciation of the Euro would drag prices down once again.

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