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Threshold Cointegration Analysis of Crude Oil Benchmarks

Shawkat M. Hammoudeh, Bradley T. Ewing and Mark A. Thompson

Year: 2008
Volume: Volume 29
Number: Number 4
DOI: 10.5547/ISSN0195-6574-EJ-Vol29-No4-4
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Abstract:
The paper examines the dynamic relationship between pairs of four oil benchmark prices (i.e., West Texas Intermediate, Brent, Dubai, and Maya), which have different physical properties and locations. The results indicate that there is a long-run equilibrium relationship between different benchmarks, regardless of their properties and locations. More importantly, there is asymmetry in the adjustment process that is specifically modeled and implications are discussed.



Physical Markets, Paper Markets and the WTI-Brent Spread

Bahattin Buyuksahin, Thomas K. Lee, James T. Moser, and Michel A. Robe

Year: 2013
Volume: Volume 34
Number: Number 3
DOI: 10.5547/01956574.34.3.7
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Abstract:
We document that, starting in the Fall of 2008, the benchmark West Texas Intermediate (WTI) crude oil has periodically traded at unheard-of discounts to the corresponding Brent benchmark. We further document that this discount is not reflected in spreads between Brent and other benchmarks that are directly comparable to WTI. Drawing on extant models linking oil inventory conditions to the futures term structure, we test empirically several conjectures about how calendar and commodity spreads (nearby vs. first-deferred WTI; nearby Brent vs. WTI) should move over time and be related to storage conditions at Cushing. We then investigate whether, after controlling for macroeconomic and physical market fundamentals, spread behavior is partly predicted by the aggregate oil futures positions of commodity index traders.





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