- John Kemp is a Reuters market analyst. The views expressed are his own –
“Most probably we will continue to have reasonably high short-term volatility but in a narrower price range between $60-95 per barrel”.
That was the (accurate) forecast for crude oil prices given by Mercuria’s head of trading Daniel Jaeggi to the UN Commodities Forum in Geneva back in March [ID:nLDE62M0MT].
In fact front-month futures <CLc1> have been trapped in an even narrower range of $60-86 for the past 12 months, shrinking to $64-86 so far in 2010. Spot prices have barely budged since July last year, despite a substantial improvement in demand, as one puzzled investment bank noted recently.
Yet many traders complain high volatility is making either directional or technical strategies difficult to implement.
The apparent contradiction (high levels of very short-term price movement in a market trending sideways) highlights the different levels of volatility prevailing at different time horizons.