Brent Oil vs TTF Gas Prices – A Tale of Two Volatilities

Price volatility is a good indicator of market dynamics for any investor willing to take exposure in energy commodities, especially as prices are characterised by unpredictable shocks and fast-changing drivers. Unlike the gas market, fluctuations in crude oil volatility do not point so much to actual changes in supply and demand than to the wider market sentiment. Volatility does not move in sync on both markets, suggesting that what prompts it on the gas market is somehow different from what flares it up on the crude oil market.

ICIS takes a look at Brent oil and TTF gas prices to understand what their changes reflect and why they seem to be tracking different patterns. In particular, gas volatility seems to be a better reflection of actual, physical disruptions than crude volatility. This, together with a more flexible gas market, has allowed implied volatility benchmarks to gain more traction as a decision-making tool in gas trading.

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