Crude price has been volatile in 2015 too, however this year it is facing
levels of volatility not seen since financial crisis of 2008/09. Yesterday crude
price dropped below $30/barrel again, however moved higher in New York session
and was finally up more than 8.5% and a week before it was up close to 11%. In
past 16 days crude has dropped on six occasions and in all of them price has
dropped more than 5% and all these trading days, only once crude has moved less
than 1% on closing basis. Average movement has been only marginally less than
5%.
While lower oil price is resulting in such volatility, when seen in
percentage scale, it is important to note that even such volatility in the past
has coincided with change in direction of trend, even if it is for short
duration.
So there could be a temporary and larger pause might be on its way for crude
oil. More importantly, recent selloffs have failed to break the lowest point
around $27/barrel, so a larger correction could be in store.
We expect WTI to test around $40-42/barrel area, before further directional
move. However, fundamental still remains unchanged in oil sector, only change is
Russia accepted OPEC meeting proposal but that doesn't ensure cuts.
WTI is currently trading at $32.8/barrel.