E-Mini Crude Oil Futures Volatility Forecast (13/12/2010)

As we correctly forecasted the last week the E-Mini Crude Oil futures did not mange to go through the $ 90 barrier. Furthermore, we warned against a rise in volatility in proximity of this price and the last part of the TGARCH plot is visibly showing an augment in the conditional standard deviation demonstrating that our forecast was quite accurate.

The actual volatility is 1.6% (25.3% annualised) and the estimation should rise until 1.8% (28.5% annualised) because the downtrend should continue in the short run bringing down the price towards the $ 80 a barrel.

However, the drop in price should be temporary because as we approach the end of the year the E-Mini Crude Oil futures are more likely to stabilise and trade sideways. Nevertheless, crude oil prices could keep on rising and break through the $ 90 level if the dollar depreciates against the euro because, at the moment, is the only factor which could seriously drive prices up or down.

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