Oil’s Implied Volatility Rises to 22-Year High on Price Moves

Oil’s Implied Volatility Rises to 22-Year High on Price Moves





By Margot Habiby
Dec. 10 (Bloomberg) -- Implied volatility for January crude oil, the major factor in determining options prices, rose to the highest in more than 22 years yesterday in a sign that traders anticipate more big moves in oil futures.
Implied volatility, a gauge of price swings in oil for future delivery that indicates how much traders are willing to pay to bet on the amount, rose to 114.41, the highest since at least 1986, according to data released today by the New York Mercantile Exchange.
“Even though prices have fallen dramatically, we’re still seeing daily ranges that are $3, $4, $5 a barrel, which is not that different from the daily ranges we were seeing at $130 a barrel,” said Tim Evans, an energy analyst with Citi Futures Perspective in New York. “Of course, now as a percentage of the price, that’s a bigger swing.”
Crude oil for January delivery rose $1.45, or 3.4 percent, to $43.52 a barrel at the 2:53 p.m. close of Nymex floor trading. Oil prices have tumbled 70 percent since reaching a record $147.27 on July 11.
Futures rose as high as $46.17 a barrel today after Russia indicated it may join OPEC efforts to bolster prices. Energy Minister Sergei Shmatko said Russia will announce proposals to cut output by Dec. 17, when the Organization of Petroleum Exporting Countries meets, Interfax said.
February futures rose $1.36, or 3.1 percent, to $46.02 a barrel. Implied volatility for less-heavily traded February oil was 96.62 yesterday, also a 22-year high for the second-most active trading month. January oil options expire Dec. 16.
In electronic trading of Nymex oil options, January $48 calls, bets that oil will rise above that level, and January $42 puts, bets that it will fall below that level, were the most active today.
January Calls
January $48 calls rose 23 cents to settle at $1.03 a barrel, or $1,030 a contract, at 4:20 p.m. on volume of 248 lots. January $42 puts fell 78 cents to $1.84 a barrel, or $1,840 a contract, on volume of 221 contracts. March $65 calls, the third-most active contract, gained 28 cents to $2.42 a barrel, or $2,420 a contract. Volume was 213 lots. One contract is for 1,000 barrels of oil.
Yesterday, April options were the day’s most active. April $65 call options jumped to 5,671 contracts in floor trading from 108 contracts the day before. The options fell 26 cents to $3.05 a barrel, or $3,050 a contract. April $45 put options rose 78 cents to $5.99 a barrel, or $5,990 a contract, on volume of 5,000 lots, up from 9 the day before.
Other active contracts yesterday included February $70 calls, February $45 puts and January $40 puts.
The Nymex distributes real-time data on electronic trading of crude oil options. Most information on floor trading, where the bulk of trading occurs, isn’t released until the next business day. The delayed data include overall volumes and open interest. The exchange releases a settlement price at the end of each business day.
To contact the reporter on this story: Margot Habiby in Dallas at mhabiby@bloomberg.net.

<TABLE border=0 cellSpacing=1 cellPadding=4 bgColor=#d2e1e8><TBODY><TR><TD align=left>PETROLEUM ($/bbl)


</TD></TR><TR><TD align=middle><TABLE border=0 cellSpacing=2 cellPadding=2 width="100%"><TBODY><TR align=right><TD> </TD><TD>PRICE*</TD><TD>CHANGE</TD><TD>% CHANGE</TD><TD>TIME</TD></TR><TR bgColor=#ffffff align=left><TD>Nymex Crude Future</TD><TD align=right>48.45</TD><TD align=right>4.93</TD><TD align=right>11.33</TD><TD align=right>13:23</TD></TR><TR><TD align=left>Dated Brent Spot</TD><TD align=right>46.46</TD><TD align=right>3.29</TD><TD align=right>7.63</TD><TD align=right>13:53</TD></TR><TR bgColor=#ffffff><TD align=left>WTI Cushing Spot</TD><TD align=right>47.68</TD><TD align=right>4.16</TD><TD align=right>9.56</TD><TD align=right>12:15</TD></TR></TBODY></TABLE></TD></TR></TBODY></TABLE>

http://boereport.com/2016/09/01/saudis-are-sick-of-cheap-oil-losing-billions-of-dollars/<header class="entry-header">[h=1]Saudis Are Sick Of Cheap Oil, Losing Billions Of Dollars[/h] <time class="entry-time" itemprop="datePublished" datetime="2016-09-01T08:46:02+00:00">September 1, 2016</time><time class="entry-time" itemprop="datePublished" datetime="2016-09-01T08:46:02+00:00">8:46 AM</time> Michael Bastasch0 Comments
</header>

Saudi Arabia is facing internal pressure to cut oil production to boost prices after two years of a crude price war they started.
“The Saudis are going to Algeria for a freeze,” a source within OPEC told Reuters. “More and more ministers are now talking among themselves to evaluate their production position.”
The Kingdom embarked on a policy of increasing production in 2014 to keep oil prices low and push out high-cost producers, like Venezuela and Nigeria. The Saudis also likely refused to cut production to punish U.S. oil companies for unlocking vast new oil and natural reserves through hydraulic fracturing.
But now the Saudis are trying to sell shares in the Aramco, the state-owned oil company, which means they need higher oil prices to entice investors and right their balance sheets. The country’s new oil minister Khalid al-Falih even said oil needs to be above $50 a barrel to achieve a balanced market.
The Saudi-led low oil policy has also cost the Kingdom billions of dollars in lost exports and forced them to dig into their cash reserves to stay afloat. OPEC as a whole has lost hundreds of billions in export revenues.
“A stable oil price at a moderate level would help an IPO. I don’t know if the IPO is the major factor – but it’s certainly a factor,” an insider told Reuters.
“Saudi Arabia does not want to crash the price,” the source said. “Their target indeed would be somewhere north of $50 – $60 or so.”
Falih has been talking to other OPEC members for months, trying to cut a deal on lower production levels, but those talks were complicated by Iran.
Iran said it needed to increase production to make up for all the market share it lost due to years of U.S.-led sanctions.
OPEC officials will meet in Algeria later this month to discuss possible production cuts with Russia. But higher oil prices would also bring U.S. shale drilling back online.
U.S. producers have only gotten more efficient at drilling over the years, and at least one company has said it can frack into Texas’ Permian Basin for as little as $2 a barrel. That’s on par with Saudi production costs.
“Definitely we can compete with anything that Saudi Arabia has,” Scott Sheffield, the CEO of Pioneer Natural Resources recently told Reuters.
“My firm belief is the Permian is going to be the only driver of long-term oil growth in this country,” he said. “And it’s going to grow on up to about 5 million barrels a day from 2 million barrels,” even with oil at $55 per barrel, according to Reuters.
Some North Dakota drillers can afford to drill at oil prices as low as $40 a barrel, but even so, the oil industry was forced to lay off about 170,000 workers since the price plunge in 2014 — though some economists say oil jobs may return soon.

Lots of fear mongering in the oil market..heavily played and I think there's a good nefarious activity that goes on within it. You gotta really filter out the noise and simply pick a direction..when it was $150 they said it was going $200..when it was $30 they said going to $20..talking heads ain't got the slightest idea and pretty sure its all about spooking people

My gf had quite a few oil and gas props in the Permian Basin over the years she inherited in trusts. Large accounts that produced 45k/mo. Thats some serious coin. Problem is when you're fracking they can go quite deep, but wells generally don't produce as long.