Oil Volatility Sinks as Shortage Concern Eases: Energy Markets

Crude oil volatility is falling to the lowest level in almost three years as brimming stockpiles and rising OPEC investment in production capacity eases concern of shortages.

Oil’s 50-day historical volatility, a measure of how much crude fluctuates around its average price during that period, declined to 23 percent yesterday, the lowest since July 2007. The measure rose to a record 108 percent at the beginning of 2009 as prices collapsed following the demise of Lehman Brothers Holdings Inc. and the onset of global recession.

The Organization of Petroleum Exporting Countries said it is planning 140 oil projects over the next five years and that its 6 million barrels a day of unused production is enough to meet demand and avoid a repeat of the price swings of 2008. U.S. crude stockpiles rose to 356 million barrels on April 2, the highest since June, and inventories held on ships are climbing, according to Morgan Stanley. (more)