Distilling the drivers of oil market volatility

Understanding the drivers of prompt crude futures volatility is crucial for oil market participants to develop useful risk management strategies, as the nature of trading today is that most manage risk and market positions to a given volatility limit. We present a method to decompose Brent volatility into its most important drivers, complementing our Brent quant model that focuses on flow-based leading indicators that impact short-term price action.



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