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Informed Trading in the WTI Oil Futures Market

Olivier Rousse and Benoit Sevi

Year: 2019
Volume: Volume 40
Number: Number 2
DOI: 10.5547/01956574.40.2.orou
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Abstract:
The weekly release of the U.S. inventory level by the DOE-EIA is known as the market mover in the U.S. oil futures market. We uncover suspicious trading patterns in the WTI futures markets in days when the inventory level is released that are higher than market forecasts: there are significantly more orders initiated by buyers in the two hours preceding the official release of the inventory level, with a drop in the average price of -0.25% ahead of the news release. This finding is consistent with informed trading. We also provide evidence of an asymmetric response of the oil price to oil-inventory news, and highlight an over-reaction that is partly compensated in the hours following the announcement.



The Negative Pricing of the May 2020 WTI Contract

Adrian Fernandez-Perez, Ana-Maria Fuertes, and Joelle Miffre

Year: 2023
Volume: Volume 44
Number: Number 1
DOI: 10.5547/01956574.44.1.afer
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Abstract:
This paper sheds light on the negative pricing of the May 2020 WTI futures contract (CLK20) on April 20, 2020. The super contango of early 2020, triggered by COVID-19 lockdowns and geopolitical tensions, incentivized cash and carry (C&C) traders to be long CLK20 and short distant contracts, while simultaneously booking storage at Cushing. Our investigation reveals that C&C arbitrage largely contributed to the lack of storage capacity at Cushing in April 2020 and the price crash relates to the reversing trades of many long CLK20 traders without pre-booked storage. Additional aggravating factors included a liquidity crush, staggering margin calls and potential price distortions due to the trade-at-settlement mechanism. The analysis suggests that claims from experts that hold index trackers responsible for the crash are unwarranted: Index trackers did not trigger the negative pricing, nor widen the futures-spot spread by rolling their positions to more distant contracts ahead of maturity.





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