The geopolitical risk premium in oil markets fell slightly, Goldman Sachs said

Robert Novoski

(Reuters) – Goopolitical risk premium gauges in oil markets have declined slightly this week, following sharp increases last week in Brent implied volatility and call option implied volatility, Goldman Sachs said.

Oil prices were stable in Asian trade as traders weighed developments in the Middle East conflict against expectations of a continued decline in demand.

The futures contract last traded at $77.72 a barrel, up 0.7%, at 0612 GMT.

Prices had plunged more than 4% in the previous session due to a possible Hezbollah-Israel ceasefire. [O/R]

Goldman Sachs still expects a peak increase of $10-$20 per barrel for Brent if there is a disruption to Iranian production as the development of the conflict remains uncertain.

However, if there are no major disruptions, prices could stabilize around current levels this quarter, the bank said in a note dated Tuesday.

Call options that imply a volatility skew jumped to mid-April levels last week, while Brent implied volatility jumped above the fair value implied in its model for the first time this year, Goldman said.

© Reuters. FILE PHOTO: A worker stands in front of a storage tank at the Rosneft oil refinery in Tuapse on Russia's Black Sea coast September 6, 2006. REUTERS/Sergei Karpukhin/File Photo

“The options market is pricing in around a 5% chance of a $20/barrel price jump, which we estimate is equivalent to a 6-month disruption of 2 million barrels per day without OPEC compensation, occurring next month,” the bank said. in last week’s notes.

The market uses implied volatility to estimate the likely future change in the price of a security.

Source link

Leave a Comment

mbd mbd mbd mbd mbd mbd mbd mbd mbd mbd mbd mbd mbd mbd mbd mbd mbd mbd mbd mbd mbd mbd mbd mbd mbd