Price Dynamics in Global Crude Oil Markets

Journal of Futures Markets, Forthcoming

Posted: 13 Oct 2012 Last revised: 12 Feb 2014

See all articles by Wai-Man (Raymond) Liu

Wai-Man (Raymond) Liu

Australian National University (ANU) - School of Finance and Applied Statistics

Emma Schultz

Australian National University (ANU)

John Swieringa

Australian National University (ANU)

Date Written: October 3, 2013

Abstract

We use high‐frequency data to better characterize price dynamics in global crude oil markets. Initially, we provide much‐needed quantitative evidence on interactions between physical and financial layers of the Brent market, highlighting the ICE Brent futures contract as the overwhelming source of price discovery in this market. Thereafter, we quantify the impact of oil supply constraints at Cushing, showing they are a significant determinant of ever decreasing levels of cointegration between Brent and WTI markets. Finally, against this backdrop we show that, on days where ICE Brent and CME WTI futures remain cointegrated, the latter still dominate price discovery.

Keywords: Price Dynamics, Crude Oil, Brent, WTI

Suggested Citation

Liu, Wai-Man (Raymond) and Schultz, Emma and Swieringa, John, Price Dynamics in Global Crude Oil Markets (October 3, 2013). Journal of Futures Markets, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2160633 or http://dx.doi.org/10.2139/ssrn.2160633

Wai-Man (Raymond) Liu

Australian National University (ANU) - School of Finance and Applied Statistics ( email )

Building 26c College of Business & Economics
Australian National University
Acton, Canberra ACT, Australian Capital Territory 2601
Australia
+61 2 612 53471 (Phone)
+61 2 612 50087 (Fax)

HOME PAGE: http://https://researchers.anu.edu.au/researchers/liu-wm

Emma Schultz (Contact Author)

Australian National University (ANU) ( email )

Canberra, Australian Capital Territory 2601
Australia

John Swieringa

Australian National University (ANU) ( email )

Canberra, Australian Capital Territory
Australia

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