Geopolitical risk premium in the oil market is decreasing slightly, said Goldman Sachs via Reuters
(Reuters) – The Goopolitical risk premium gauge for the oil market edged lower this week, following a sharp rise last week in both Brent futures and call options implying skewed volatility, Goldman Sachs said.
Oil prices were steady in Asian trading as traders weighed developments in the Middle East conflict against expectations of continued demand.
futures last traded at $77.72 a barrel, up 0.7%, as of 0612 GMT.
Prices fell more than 4% in the previous session on the Hezbollah-Israel ceasefire. [O/R]
Goldman Sachs still expects a high rise of $ 10-$ 20 per barrel of Brent in the event of disruption of Iranian production as the development of the conflict remains uncertain.
However, barring major disruptions, prices are likely to stabilize at current levels this quarter, the bank said in a note on Tuesday.
Call options implied volatility skew jumped to mid-April levels last week, while Brent implied volatility fell above the fair value predicted by the model for the first time this year, Goldman said.
“Options markets are pricing in a roughly 5% price jump of $20/bbl, which we estimate corresponds to 2 million barrels per day and a 6-month disruption without OPEC, which occurs within the next month,” the bank said. in the letter last week.
The market uses volatility to estimate the probability of a future price change of a security.
