What's Next for Oil as Volatility Climbs?

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Sept. 9 (Bloomberg) -- Bloomberg's Scarlet Fu and Bloomberg Tradebook's Greg Bender put futures in focus with a look at the trading range for oil in "On The Markets." They speak on Bloomberg Television's "Lunch Money."

Once the price broke out about $108, everybody is going, what's next?

Traders are looking for tells.

Will volatility is at the highest it has been in months -- oil volatility is at the highest it has been in months.

They are pricing in some future movement in the contracts.

It's a little bit of a calm before the storm.

And people are looking at something called the skew, the relationships of the upside call to the downside put.

Puts will trade at a premium in implied volatility terms to calls.

Hedgers are active in the markets.

They want to protect downside.

That is the natural state of being.

Right now, you have calls trading at a premium to puts.

That is telling us that not only is built -- is volatility high, people are hedging on the upside.

What about wti versus brent?

The brent-wti spread has been quiet, just like the wti contracts have been pretty quiet.

If you look at the individual term structure of brent and wti, the front month contracts, the contracts that will expire sooner, our trading at a premium to the further contracts -- are trading at a higher premium to the further contracts.

They could last for a while.

If you look back to 2008 and before that, 2005, backwardation can last for months.

Watch the 50-day moving average.

Are there any other levels people are paying close attention to?

Whenever something breaks out of a trading range, like wti did recently, once it breaks out of the $108 level, you have the 50- day moving average at $105, and traders are focused not only on the moving average but also the slope.

It is sloping up, which is very bullish.

What about the crude to s&p 500 ratio?

What is it telling us?

That ratio has been moving down , in equity's favor for months now.

Thank you so much.

We are "on the markets" again in 30 minutes.

""market makers" -- "market makers" up now.

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This text has been automatically generated. It may not be 100% accurate.

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