The chop in WTI continues...The chop in WTI continues as volatility & supply give mixed signals.
Yesterday we highlighted the importance of keeping track of the move in OVX (oil volatility) after the big spike into the close on Wednesday. At the open yesterday, we saw OVX come down sharply but failed to take out the prior low and confirmed the recent upward trending move in volatility is still in place (negative for the underlying asset).
Thus, from a pure volatility point of view the probability if higher for further downside for WTI. However, the issue with the Suez Canal being blocked, and reports out earlier during Asia-Pac that the efforts to unblock the ship might take another week saw some relief for Oil prices.
So, where to from here? The med-term bias remains tilted to the upside, but we've had very violent moves in volatility over the past few sessions which is a warning sign.
For now, the best option is to wait and see how volatility behaves in today's session. If the Suez concerns are enough to keep price elevated and we see OVX taking out recent lows, that could be setting up for a long opportunity.
However, if we see OVX maintain it's upward trending move despite the more constructive price action, it might be best to stay on the side lines in the short-term.
