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The Role of Speculators in the Crude Oil Futures Market

40 Pages Posted: 16 Jul 2009  

Jeffrey H. Harris

American University

Bahattin Buyuksahin

Bank of Canada

Date Written: July 16, 2009


Abstract: The coincident rise in crude oil prices and increased numbers of financial participants in the crude oil futures market from 2000-2008 has led to allegations that "speculators" drive crude oil prices. As crude oil futures peaked at $147/bbl in July 2008, the role of speculators came under heated debate. In this paper, we employ unique data from the U.S. Commodity Futures Trading Commission (CFTC) to test the relation between crude oil prices and the trading positions of various types of traders in the crude oil futures market. We employ Granger Causality tests to analyze lead and lag relations between price and position data at daily and multiple day intervals. We find little evidence that hedge funds and other non-commercial (speculator) position changes Granger-cause price changes;–the results instead suggest that price changes do precede their position changes.

Keywords: Crude Oil, Futures Markets, Speculators, Granger Causality, Hedge Funds, Commodity Index Traders

JEL Classification: G12, G14, G23

Suggested Citation

Harris, Jeffrey H. and Buyuksahin, Bahattin, The Role of Speculators in the Crude Oil Futures Market (July 16, 2009). Available at SSRN: or

Jeffrey H. Harris

American University ( email )

Kogod School of Business
4400 Massachusetts Ave., N.W.
Washington, DC 20016-8044
United States
202-885-6669 (Phone)

Bahattin Buyuksahin (Contact Author)

Bank of Canada ( email )

234 Wellington Street
Ontario, Ottawa K1A 0G9

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