We analyze empirically what drives market expectations of crude oil price volatility. Between 2000 and 2014, we investigate the links between the term structure of oil option‐implied volatilities (IVs) and global macroeconomic conditions, physical market fundamentals (OPEC surplus output capacity, oil storage) and economy‐wide financial conditions (captured by the equity VIX). The VIX and the constraints affecting oil output or inventories have statistically and economically significant explanatory power for the short‐dated oil IVs and for the WTI IV term structure. After controlling for the VIX, in contrast, macroeconomic variables and a measure of speculative activity based on public data are both insignificant. Our model, which outperforms a benchmark ARIMA specification both in and out of sample, suggests an approach for studying volatility in asset markets that behave as satellites to other markets. Published 2015. This article is a U.S. Government work and is in the public domain in the USA. Jrl Fut Mark 36:317–344, 2016

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We investigate empirically the main factors related to coffee and sugar (“softs”) price uncertainty. We link physical market fundamentals as well as financial variables to (i) market expectations of future price volatility and (ii) the extent to which these two commodities both co‐move with equities. The physical market fundamentals that matter include the state of inventories, weather, and disease outbreaks. Beyond these fundamental factors, our results highlight the crucial role of financial market sentiment in understanding cross market linkages and the magnitude of softs market uncertainty. © 2017 Wiley Periodicals, Inc. Jrl Fut Mark 37:744–765, 2017

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