Oil is pulling away from the market’s biggest storm in seven years.

A measure of price volatility has tumbled from the highest level since January 2009 as the market frenzy eases amid a potentialpact between the world’s largest producers to freeze output. 

Investors in February fixated on how and when Saudi Arabia would engage other producers clamoring for a way to boost prices. Crude in New York crashed by about half since the biggest producer in the Organization of Petroleum Exporting Countries led the group’s 2014 decision to not to cut output in the face of a global glut, opting instead to keep taps open to force out higher-cost rivals.

From the “successful” talks between Saudi Arabian Oil Minister Ali al-Naimi and his Venezuelan counterpart early last month, to the Feb. 16 Saudi-Russia output freeze announcement, to Iran’s rejection of the plan as “ridiculous,” the CBOE Crude Oil Volatility Index averaged the highest level since 2009. Since the pact was announced, the measure of expectations of price swings has tumbled to the lowest in almost two months while oil has gained about 18 percent to trade near $35.

“Since the Saudis and Russia reached an agreement to freeze output, volatility in the market has eased and oil prices have stabilized with the focus shifting back to fundamentals,” said Hong Sung Ki, a senior analyst at Samsung Futures Inc. “More stable oil prices are expected in the coming months, possibly up to the $40 level, at least until the next OPEC meeting in June.”

U.S. benchmark West Texas Intermediate crude has climbed more than 30 percent since dropping to the lowest level in 12 years last month, and was at $34.45 a barrel at 9:20 a.m. London time. Aggregate trading volumes have declined from a record high reached Feb. 11 while aggregate open interest has decreased from a February peak.

David Fuller's view

Low prices eventually curb supply and lead to increased consumption.  That is exactly what we are seeing for Brent and also WTI crude oil.  This service maintains that we have seen lows of at least short-term significance and probably much more.  A further recovery towards at least $40 should follow.