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E-Mini Crude Oil Futures Volatility Forecast (13/06/2011)

E-Mini Crude Oil market moved higher in the first half of the week and then retraced in the second half transforming a bullish week in a sideways one. In fact, the market opened at $ 98.8 rose to $ 99.1 on Tuesday, moved higher to 101.8 on Thursday and sharply dropped to $ 99 on Friday.

The actual volatility is 1.9% (30.1% in annual terms) and the curve has now touched the equilibrium point which is stable around the 1.6% area (25.3% annualised) whilst the TGARCH plot is displaying a fairly stable situation where the fluctuations are quite constant and not high.

Additionally, the rise and fall of E-Mini Crude Oil futures has been caused by 2 key factors that significantly influenced the price action: the initial depreciation and consequent appreciation of the US dollar and the meeting of OPEC members.

OPEC countries addressed the supply shortage provoked by Libya but, although Saudi Arabia was willing to compensate for Libya’s default, the overall supply of barrels per day remained unchanged.

The initial aim of OPEC’s meeting was to augment the supply of barrels in order to decrease the price and boost the global demand but the member did not manage to reach an agreement and the sharp appreciation of the American currency in the second half of the week contributed to drag E-Mini Crude Oil futures prices back down in the $ 99 area.

The HyperVolatility team is neither bullish nor bearish because it is probable that the price is going to move sideways even if the low volatility environment could easily be twisted by short term variance burst which would push futures prices back in the $ 95 – $ 96.5 area (particularly in the 2nd half of the week).

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