Baku, Azerbaijan, Sept.11
By Leman Zeynalova – Trend:
West Texas Intermediate (WTI) 30-day historical volatility increased from August 1 to September 5, increasing from 38.7 percent to 45.1 percent, Trend reports citing the US Energy Information Administration (EIA).
Unlike implied volatility, which is a calculated measure derived from options prices, historical volatility measures the magnitude of daily changes in closing prices for a commodity during a given time in the past.
“In 2019, historical volatility peaked at 59.4 percent in January, as WTI crude oil prices increased from large price declines in December because of supply-side uncertainty following an extension of the production agreement by producers in the Organization of the Petroleum Exporting Countries (OPEC) and several non-OPEC producers (OPEC+),” reads the report.
The mid-August increase in volatility is likely related to demand-side uncertainty as well as the addition of two pipelines out of the Permian Basin, according to EIA.
The volatility of copper futures prices has been lower than volatility of WTI prices because copper futures prices almost solely respond to demand-side concerns rather than supply-side uncertainty.
In general, the industrial metal is used in many economically sensitive sectors, such as construction and industrial production, and lower prices may indicate expectations of a slowdown in industrial and economic activity.
The volatility in the S&P 500 Index, which includes a basket of companies across many industries, was greater than the volatility of copper in late August, possibly in response to global trade concerns and slowing demand.
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