The Federal Reserve raised the Fed Funds rate 4 times to 2.50% in 2018, the highest levels since the Financial Crisis, causing asset volatilities (realized and implied) to markedly increase. Opportunities in proprietary trading not available earlier this decade have emerged accordingly, exacerbated by the Volcker rule and other regulations limiting banks with deposits at the Federal Reserve.
At the end of 2015, the federal ban on crude oil exports was lifted. Since then, the US has become the world's largest crude oil producer and its de facto marginal supplier credited to hydraulic fracturing innovation. Because of quality specifications and deliverability, growing international commercial trading interest in the American energy derivative space has caused the CME WTI futures contract to emerge as a formidable contender to be the global price discovery source in light, sweet crude oil.
US economic demand for crude oil may wax and wane cyclically against a backdrop of increased energy efficiency. In reaction, domestic producers seek to diversify their customer base and tap into long-term global growth and continued demand for fossil fuels. These newer foreign buyers are increasingly transacting in the CL futures market reflecting those shifting export fundamentals. A changing participant pool with increasingly diversified market outlooks and views aligns with a fresh macro environment fostering volatility to create unique opportunities in CL for years to come.
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