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Schork Oil Outlook: Crude Volatility Is Surging

Yesterday (Thursday), spot Nymex crude oil plunged another $2.86 a barrel (-3.6%) and settled, 77.11, at a 56-session low.

The contract (continuous) is now off by $10.04 a barrel or 11½% since posting a post bubble high three (!) sessions ago… and that does not include that $2.53 post outcry plunge on the screens in the wake of that alleged fat-finger-mistake. Therefore, the CBOE Oil VIX (OVX) responded in accord by jumping 11½% to 39.73.

Bottom line, vol is surging and spot Nymex WTI bears are now testing the 200-day moving average at 76.38… in other words, the bulls are not in a desirable place. Analysts at The Schork Reportare watching this volatility — and its potential implications — closely.

Meanwhile, support for the Philadelphia Oil Service Index (OSX) crashed through the 38% retracement at 201.73 yesterday. Bloomberg has reported that 200 attorneys met in New Orleans to “… devise a strategy for resolving virtually all spill litigation within three months…” OSX component Transocean will be an obvious defendant in any pending lawsuits.

The company has already reported that the Deepwater Horizon incident will slash 2010 revenue by $130 million.

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Stephen Schork is the Editor of The Schork Reportand has more than 17 years experience in physical commodity and derivatives trading, risk systems modeling and structured commodity finance.