Oil’s tumble to a five-month low was driven purely by technical trading and supply is still getting tighter, according to Citigroup Inc. and Goldman Sachs Group Inc. The current price plunge began when WTI broke through its 200-day moving average. Once that gave way, another key technical indicator called a Fibonacci retracement was breached, paving the way to the low of the year and then $45 a barrel.
In the options market, there are some signs investors might be less pessimistic than they seem following last week’s price plunge. The so-called put skew -- which measures the difference in implied volatility between different types of options and serves as a barometer to risk perception in the market -- traded near flat Friday even after oil’s almost 5 percent selloff the day before.
“If there was such a radical shift in sentiment in the market, the skew would have been affected by the correction we had,” Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London, said by telephone. “Our view is that the market has not necessarily jumped on the bearish bandwagon just yet.”
This article was provided by Bloomberg News.