Brent second month volatility skew is holding a slight premium to the calls as speculation over a possible relaxation of the Chinese covid policy adds to the market uncertainty. Increasing covid cases and confirmation of China’s commitment to the covid policy have reduced optimism of a China reopening.
- The Brent second month calls are currently about 0.25% over the puts down from a skew of as much as 2% on Nov 1. The Dec23 Brent skew has drifted slightly lower to a premium of around -7.4% to the puts.
- Economic slowdown concerns, China demand uncertainty and the possible disruption to Russian output due to EU sanctions and the G7 price cap are maintaining high market volatility. The front month Brent implied options volatility has been holding around 48% since the start of November.
Source: Bloomberg