Facebook LinkedIn Instagram Twitter
Shop
Search
Begin New Search
Proceed to Checkout

Search Results for All:
(Showing results 1 to 8 of 8)



Understanding Crude Oil Prices

James D. Hamilton

Year: 2009
Volume: Volume 30
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol30-No2-9
View Abstract

Abstract:
This paper examines the factors responsible for changes in crude oil prices. The paper reviews the statistical behavior of oil prices, relates this to the predictions of theory, and looks in detail at key features of petroleum demand and supply. Topics discussed include the role of commodity speculation, OPEC, and resource depletion. The paper concludes that although scarcity rent made a negligible contribution to the price of oil in 1997, it could now begin to play a role.



The Role of Speculation in Oil Markets: What Have We Learned So Far?

Bassam Fattouh, Lutz Kilian, and Lavan Mahadeva

Year: 2013
Volume: Volume 34
Number: Number 3
DOI: 10.5547/01956574.34.3.2
View Abstract

Abstract:
A popular view is that the surge in the real price of oil during 2003-08 cannot be explained by economic fundamentals, but was caused by the increased financialization of oil futures markets, which in turn allowed speculation to become a major determinant of the spot price of oil. This interpretation has been driving policy efforts to tighten the regulation of oil derivatives markets. This survey reviews the evidence supporting this view. We identify six strands in the literature and discuss to what extent each sheds light on the role of speculation. We find that the existing evidence is not supportive of an important role of speculation in driving the spot price of oil after 2003. Instead, there is strong evidence that the co-movement between spot and futures prices reflects common economic fundamentals rather than the financialization of oil futures markets.



The Role of Financial Speculation in Driving the Price of Crude Oil

Ron Alquist and Olivier Gervais

Year: 2013
Volume: Volume 34
Number: Number 3
DOI: 10.5547/01956574.34.3.3
View Abstract

Abstract:
As financial firms have increased their positions in the oil futures market during the past ten years, oil prices have increased dramatically as well. The coincidence of these two events has led some observers to argue that financial speculation caused the oil-price increases. Yet several arguments cast doubt on the validity of this claim. For example, although the quantity of oil implied by the number of open futures contracts is much larger than U.S. daily oil consumption, comparing these two statistics is misleading because not all paper oil is immediately deliverable. In addition, changes in financial firms� positions do not predict oil-price changes, but oil-price changes predict changes in positions. Other explanations for the oil-price increases include macroeconomic fundamentals such as increased demand from emerging Asia. Of these explanations, the most consistent with the facts relates the oil-price increases to a series of positive demand shocks emanating from emerging Asia.



Financial Speculation in Energy and Agriculture Futures Markets: A Multivariate GARCH Approach

Matteo Manera, Marcella Nicolini, and Ilaria Vignati

Year: 2013
Volume: Volume 34
Number: Number 3
DOI: 10.5547/01956574.34.3.4
View Abstract

Abstract:
This paper analyses futures prices of four energy commodities (crude oil, heating oil, gasoline and natural gas) and five agricultural commodities (corn, oats, soybean oil, soybeans and wheat), over the period 1986�2010. Using DCC multivariate GARCH models, it provides new evidence on four research questions: 1) Are macroeconomic factors relevant in explaining returns of energy and nonenergy commodities? 2) Is financial speculation significantly related to returns in futures markets? 3) Are there significant relationships among returns, either in their mean or variance, across different markets? 4) Is speculation in one market affecting returns in other markets? Results suggest that the S&P 500 index and the exchange rate significantly affect returns. Financial speculation, proxied by Working�s T index, is poorly significant in modelling returns of commodities. Moreover, spillovers between commodities are present and the conditional correlations among energy and agricultural commodities display a spike around 2008.



Herding and Speculation in the Crude Oil Market

Celso Brunetti, Bahattin Buyuksahin, and Jeffrey H. Harris

Year: 2013
Volume: Volume 34
Number: Number 3
DOI: 10.5547/01956574.34.3.5
View Abstract

Abstract:
We examine whether herding among speculators in U.S. crude oil futures markets affects market prices and volatility. Using detailed data on the positions of hedge funds and swap dealers from 2005-2009, we find little evidence that herding destabilizes the crude oil futures market. To the contrary, herding among speculative traders is negatively correlated with contemporaneous volatility and does not lead next-day volatility. Our impulse-response analysis shows that market regulators should monitor herding since a shock to herding among all groups may lead to price changes, and, in the case of hedge funds, may lead to increased volatility. Interestingly, however, increased swap dealer herding actually dampens crude oil price volatility.



Measuring Index Investment in Commodity Futures Markets

Dwight R. Sanders and Scott H. Irwin

Year: 2013
Volume: Volume 34
Number: Number 3
DOI: 10.5547/01956574.34.3.6
View Abstract

Abstract:
The "Masters Hypothesis" is the claim that unprecedented buying pressure in recent years from new index investment created a massive bubble in commodity futures prices. Due to data limitations, some recent studies of the market impact of index investment in the WTI crude oil futures market impute index positions. We investigate the accuracy of the algorithm popularized by Masters (2008) to estimate index positions. The estimates generated by the Masters algorithm deviate substantially from the positions reported in the U.S. Commodity Futures Trading Commission's (CFTC) Index Investment Data (IID) report--the agency's best data on index positions. The Masters algorithm over-estimates the gross WTI crude oil position by an average of 142,000 contracts. Importantly, the deviation in the first half of 2008, the period of greatest concern about the market impact of index investment, is directionally wrong. These results suggest empirical tests of market impact based on mapping algorithms in WTI crude oil futures should be viewed with considerable caution.



Fundamental and Financial Influences on the Co-movement of Oil and Gas Prices

Derek Bunn, Julien Chevallier, Yannick Le Pen, and Benoit Sevi

Year: 2017
Volume: Volume 38
Number: Number 2
DOI: 10.5547/01956574.38.2.dbun
View Abstract

Abstract:
As speculative flows into commodity futures are expected to link commodity prices more strongly to equity indices, we investigate whether this process also creates increased correlations amongst the commodities themselves. Considering U.S. oil and gas futures, we investigate whether common factors, derived from a large international data set of real and nominal macroeconomic variables by means of the large approximate factor models methodology, are able to explain both returns and whether, beyond these fundamental common factors, the residuals remain correlated. We further investigate a possible explanation for this residual correlation by using some proxies for trading intensity derived from CFTC publicly available data, showing most notably that the proxy for speculation in the oil market increases the oil-gas correlation. We thus identify the central role of financial activities in shaping the link between oil and gas returns.



Speculation in Commodity Futures Markets, Inventories and the Price of Crude Oil

Sung Je Byun

Year: 2017
Volume: Volume 38
Number: Number 5
DOI: 10.5547/01956574.38.5.sbyu
View Abstract

Abstract:
This paper examines the role of inventories in refiners' gasoline production and develops a structural model of the relationship between crude oil prices and inventories. Using data on inventories and prices of oil futures, I show that convenience yields decrease at a diminishing rate as inventories increase, consistent with the theory of storage. In addition to exhibiting seasonal and procyclical behaviors, I show that the historical convenience yield averages about 18 percent of the oil price from March 1989 to November 2014. Although some have argued that a breakdown of the relationship between crude oil inventories and prices following increased financial investors' participation after 2004 was evidence of a speculative effect, I find that the proposed price-inventory relationship is stable over time. The empirical evidence indicates that crude oil prices remained tied to oil-market fundamentals such as inventories, suggesting that the contribution of financial investors' activities was weak.





Begin New Search
Proceed to Checkout

 





function toggleAbstract(id) { alert(id); }