Declining Implied Volatility in WTI Crude Oil

EIA Weekly Petroleum Status Report: Talking Points

• Crude oil imports ↑536,000 bpd last week, driving a larger-than-expected 3.0 million barrel increase in crude oil stocks
• Refineries are slowly ramping up: Utilization ↑1.4% as Cushing, OK crude oil stocks ↓700,000 barrels, the 7th consecutive weekly decrease
• Distillate fuel demand was soft: Inventories ↓600,000 barrels vs. ↓1,600,000 barrels expected
• Moderately bullish Gasoline draw-down: Stocks fell by 900,000 vs. 400,000 barrel build expected
• Cracks reacted differently: Heat crack sold off $0.45 in Apr0 to trade $6.48 while Apr0 RBOB crack rose the same amount to $12.34

EIA Weekly Petroleum Status Report: Talking Points

• Crude oil stocks ↑3.1 million barrels nationally, including a 4.7 million barrel increase in the Gulf Coast region after imports ↑206,000 bpd
• Distillate fuel oil inventories ↓2.9 million barrels on the cold weather, though stocks remain 12.5 million barrels above levels one year ago
• Motor gasoline production ↓379,000 bpd and imports ↓459,000 bpd as suppliers react to tepid shoulder season demand
• Refinery utilization rose by 0.7% to 79.8%, implying that at least 3.6 million bpd of US capacity remains idle due to weak product cracks

Consumer Hedge Tear Sheet: February 18th

Crude Oil Implied Volatility Spikes

The implied volatility of WTI options spiked 4.25% during today's trading session, rising to 36.5% annualized. Worse-than-expected US unemployment figures and increasing doubts regarding the Greek, Portuguese and Spanish fiscal deficits led March 2010 WTI futures down over $4.00 earlier today.

Besides today the most recent >4% move in WTI implied volatility occured on July 6, 2009.

US distillate inventories are reducing as expected during the winter - though levels remain far above prior years.

Source: US Energy Information Agency, http://tonto.eia.doe.gov/dnav/pet/hist/wdistus1w.htm