HardAssetsInvestor

Written by Sumit Roy  |

January 30, 2013

WTI Nears $100 Amid Broad Risk Rally, Oil Volatility Plunges To Record Low

Details

We take a look at the latest developments in the oil market, including charts of all the major inventory categories.

The Department of Energy reported this morning that in the week ending Jan. 25, U.S. crude oil inventories increased by 5.9 million barrels, gasoline inventories decreased by 1 million barrels, distillate inventories decreased by 2.3 million barrels and total petroleum inventories increased by 2 million barrels.

Oil prices were higher after the release of the latest inventory figures. Both Brent and WTI have rallied to just shy of our price targets of $117 and $100, respectively, amid a broad-based rally in risk assets. In our view, while there may still be a bit more upside remaining, the rally is running out of steam.

We expect oil to be largely range-bound this year, and thus favor the downside from these prices. Once buying opportunities present themselves at lower levels, we would go long again.

BRENT

WTI

Entry and exit points will be extremely crucial in this low-volatility environment. Indeed, this week, the CBOE Oil Volatility Index hit its lowest level since its introduction in 2007.

CBOE Crude Oil Volatility Index

Bottom Line: Traders who purchased oil at lower levels may begin to take profits ahead of the inevitable correction in prices. Entry and exit points are especially important in this low-volatility, range-bound market.