Price relationships in crude oil futures: new evidence from CFTC disaggregated data
Chevallier, Julien (2013), Price relationships in crude oil futures: new evidence from CFTC disaggregated data, Environmental Economics and Policy Studies, 15, 2, p. 133-170. http://dx.doi.org/10.1007/s10018-012-0045-3
Type
Article accepté pour publication ou publiéDate
2013-04Journal name
Environmental Economics and Policy StudiesVolume
15Number
2Publisher
Springer
Pages
133-170
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Chevallier, JulienAbstract (EN)
This paper attempts to reconcile two strands of literature on oil and speculation: one that posits the predominance of supply/demand fundamentals, and one that investigates the hypothesis of speculative trading. To do so, we develop a Markov switching analysis based on the WTI crude oil futures price, CFTC disaggregated data, and fundamentals of the oil price. The benefits of this approach are twofold: (1) the model is able to track changes in the underlying business cycle, and (2) the model explicitly incorporates data on the net positions of money managers as a proxy for speculative activity. After verifying the sensitivity of our results to the inclusion of supply and demand factors on the oil market, we cannot eliminate statistically the possibility of speculation among the main reasons behind the 2008 oil price swing. We also explicitly recognize the influence of many other economic variables during that specific time period.This paper attempts to reconcile two strands of literature on oil and speculation: one that posits the predominance of supply/demand fundamentals, and one that investigates the hypothesis of speculative trading. To do so, we develop a Markov switching analysis based on the WTI crude oil futures price, CFTC disaggregated data, and fundamentals of the oil price. The benefits of this approach are twofold: (1) the model is able to track changes in the underlying business cycle, and (2) the model explicitly incorporates data on the net positions of money managers as a proxy for speculative activity. After verifying the sensitivity of our results to the inclusion of supply and demand factors on the oil market, we cannot eliminate statistically the possibility of speculation among the main reasons behind the 2008 oil price swing. We also explicitly recognize the influence of many other economic variables during that specific time period.Subjects / Keywords
Crude oil futures; speculation; CFTC disaggregated data; Markov-switching modelRelated items
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