IDEAS home Printed from https://ideas.repec.org/a/kap/iaecre/v16y2010i3p257-26810.1007-s11294-010-9266-z.html
   My bibliography  Save this article

Crude Oil Futures as an Indicator of Market Changes: A Graphical Analysis

Author

Listed:
  • Michael Ye
  • John Zyren
  • Joanne Shore
  • Thomas Lee

Abstract

This study investigates the changing relationship between price and volume traded of short- and long-maturity NYMEX light sweet crude oil futures contracts and major changes in the physical crude oil market during the last decade. Monthly series for the #1-month to 84-month out maturity contracts are generated from daily price and volume data for NYMEX West Texas Intermediate (WTI) futures contracts for the period from January 2000 to the middle of 2009. 3-D graphical analysis of the futures prices, contract volumes, maturity dates, and time is used to demonstrate the changing trading volume pattern and evolution of the shape of futures price term structure across various contract maturities in different market regimes. The study observes the impacts of both May 2004, when excess production capacity reached nearly zero, and September 2006, when electronic trading was implemented on the NYMEX WTI futures markets. This analysis will be used to determine if futures contract information can provide an early indication of market regime shifts and improve short-run crude oil spot price forecast models. Copyright International Atlantic Economic Society 2010

Suggested Citation

  • Michael Ye & John Zyren & Joanne Shore & Thomas Lee, 2010. "Crude Oil Futures as an Indicator of Market Changes: A Graphical Analysis," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 16(3), pages 257-268, August.
    • Handle: RePEc:kap:iaecre:v:16:y:2010:i:3:p:257-268:10.1007/s11294-010-9266-z
    DOI: 10.1007/s11294-010-9266-z
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s11294-010-9266-z
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s11294-010-9266-z?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Eduardo Schwartz & James E. Smith, 2000. "Short-Term Variations and Long-Term Dynamics in Commodity Prices," Management Science, INFORMS, vol. 46(7), pages 893-911, July.
    2. Bessembinder, Hendrik, et al, 1995. "Mean Reversion in Equilibrium Asset Prices: Evidence from the Futures Term Structure," Journal of Finance, American Finance Association, vol. 50(1), pages 361-375, March.
    3. Fung, Joseph K.W. & Lien, Donald & Tse, Yiuman & Tse, Yiu Kuen, 2005. "Effects of electronic trading on the Hang Seng Index futures market," International Review of Economics & Finance, Elsevier, vol. 14(4), pages 415-425.
    4. James D. Hamilton, 2009. "Understanding Crude Oil Prices," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 179-206.
    5. Cindy W. Ma, 1989. "Forecasting efficiency of energy futures prices," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 9(5), pages 393-419, October.
    6. Lutz Kilian, 2009. "Not All Oil Price Shocks Are Alike: Disentangling Demand and Supply Shocks in the Crude Oil Market," American Economic Review, American Economic Association, vol. 99(3), pages 1053-1069, June.
    7. Geman, Hélyette & Kharoubi, Cécile, 2008. "WTI crude oil Futures in portfolio diversification: The time-to-maturity effect," Journal of Banking & Finance, Elsevier, vol. 32(12), pages 2553-2559, December.
    8. Michael Ye & John Zyren & Carol Blumberg & Joanne Shore, 2009. "A Short-Run Crude Oil Price Forecast Model with Ratchet Effect," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 37(1), pages 37-50, March.
    9. Tse, Yiuman & Xiang, Ju, 2005. "Market quality and price discovery: Introduction of the E-mini energy futures," Global Finance Journal, Elsevier, vol. 16(2), pages 164-179, December.
    10. Paul Davidson, 2008. "Crude Oil Prices:," Challenge, Taylor & Francis Journals, vol. 51(4), pages 110-118.
    11. Chantziara, Thalia & Skiadopoulos, George, 2008. "Can the dynamics of the term structure of petroleum futures be forecasted? Evidence from major markets," Energy Economics, Elsevier, vol. 30(3), pages 962-985, May.
    12. Ronald D. Ripple & Imad A. Moosa, 2007. "Hedging effectiveness and futures contract maturity: the case of NYMEX crude oil futures," Applied Financial Economics, Taylor & Francis Journals, vol. 17(9), pages 683-689.
    13. Mihaela Manoliu & Stathis Tompaidis, 2002. "Energy futures prices: term structure models with Kalman filter estimation," Applied Mathematical Finance, Taylor & Francis Journals, vol. 9(1), pages 21-43.
    14. Christopher L. Gilbert & Herbert A. Rijken, 2006. "How is Futures Trading Affected by the Move to a Computerized Trading System? Lessons from the LIFFE FTSE 100 Contract," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 33(7-8), pages 1267-1297.
    15. Christopher L. Gilbert & Herbert A. Rijken, 2006. "How is Futures Trading Affected by the Move to a Computerized Trading System? Lessons from the LIFFE FTSE 100 Contract," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 33(7‐8), pages 1267-1297, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:kap:iaecre:v:16:y:2010:i:3:p:257-268 is not listed on IDEAS
    2. Ames, Matthew & Bagnarosa, Guillaume & Matsui, Tomoko & Peters, Gareth W. & Shevchenko, Pavel V., 2020. "Which risk factors drive oil futures price curves?," Energy Economics, Elsevier, vol. 87(C).
    3. Guglielmo Maria Caporale & Davide Ciferri & Alessandro Girardi, 2014. "Time-Varying Spot and Futures Oil Price Dynamics," Scottish Journal of Political Economy, Scottish Economic Society, vol. 61(1), pages 78-97, February.
    4. Morana, Claudio, 2013. "Oil price dynamics, macro-finance interactions and the role of financial speculation," Journal of Banking & Finance, Elsevier, vol. 37(1), pages 206-226.
    5. Papież, Monika & Śmiech, Sławomir, 2015. "Dynamic steam coal market integration: Evidence from rolling cointegration analysis," Energy Economics, Elsevier, vol. 51(C), pages 510-520.
    6. Eyal Dvir & Ken Rogoff, 2009. "The Three Epochs of Oil," Boston College Working Papers in Economics 706, Boston College Department of Economics.
    7. Wang, Yun-Yi & Chang, Chiung-Chiao & Lee, Wan-Chen, 2013. "Price discovery between regular and mini index futures in the Taiwan Futures Exchange," International Review of Economics & Finance, Elsevier, vol. 27(C), pages 224-237.
    8. Zhang, Hui Jun & Dufour, Jean-Marie & Galbraith, John W., 2016. "Exchange rates and commodity prices: Measuring causality at multiple horizons," Journal of Empirical Finance, Elsevier, vol. 36(C), pages 100-120.
    9. Mellios, Constantin & Six, Pierre & Lai, Anh Ngoc, 2016. "Dynamic speculation and hedging in commodity futures markets with a stochastic convenience yield," European Journal of Operational Research, Elsevier, vol. 250(2), pages 493-504.
    10. Ledenyov, Dimitri O. & Ledenyov, Viktor O., 2015. "Wave function method to forecast foreign currencies exchange rates at ultra high frequency electronic trading in foreign currencies exchange markets," MPRA Paper 67470, University Library of Munich, Germany.
    11. Śmiech, Sławomir & Papież, Monika & Dąbrowski, Marek A., 2015. "Does the euro area macroeconomy affect global commodity prices? Evidence from a SVAR approach," International Review of Economics & Finance, Elsevier, vol. 39(C), pages 485-503.
    12. Horváth, Lajos & Liu, Zhenya & Rice, Gregory & Wang, Shixuan, 2020. "A functional time series analysis of forward curves derived from commodity futures," International Journal of Forecasting, Elsevier, vol. 36(2), pages 646-665.
    13. Martina, Esteban & Rodriguez, Eduardo & Escarela-Perez, Rafael & Alvarez-Ramirez, Jose, 2011. "Multiscale entropy analysis of crude oil price dynamics," Energy Economics, Elsevier, vol. 33(5), pages 936-947, September.
    14. Chung, Huimin & Sheu, Her-Jiun & Hsu, Shufang, 2010. "Trading platform, market volatility and pricing efficiency in the floor-traded and E-mini index futures markets," International Review of Economics & Finance, Elsevier, vol. 19(4), pages 742-754, October.
    15. Fernando Antonio Lucena Aiube & Ariel Levy, 2019. "Recent movement of oil prices and future scenarios [Movimentos recentes dos preços do petróleo e os cenários futuros]," Nova Economia, Economics Department, Universidade Federal de Minas Gerais (Brazil), vol. 29(1), pages 223-248, January-A.
    16. Jean-Thomas Bernard, Lynda Khalaf, Maral Kichian, and Sebastien McMahon, 2015. "The Convenience Yield and the Informational Content of the Oil Futures Price," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2).
    17. Lee, Chi-Chuan & Lee, Chien-Chiang & Ning, Shao-Lin, 2017. "Dynamic relationship of oil price shocks and country risks," Energy Economics, Elsevier, vol. 66(C), pages 571-581.
    18. Haugom, Erik & Mydland, Ørjan & Pichler, Alois, 2016. "Long term oil prices," Energy Economics, Elsevier, vol. 58(C), pages 84-94.
    19. Pham T. T. Trinh & Bui T. T. My, 2023. "The impact of world oil price shocks on macroeconomic variables in Vietnam: the transmission through domestic oil price," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 37(1), pages 67-87, May.
    20. Bai, Yizhou & Xue, Cheng, 2021. "An empirical study on the regulated Chinese agricultural commodity futures market based on skew Ornstein-Uhlenbeck model," Research in International Business and Finance, Elsevier, vol. 57(C).
    21. Wang, Yudong & Hao, Xianfeng, 2022. "Forecasting the real prices of crude oil: A robust weighted least squares approach," Energy Economics, Elsevier, vol. 116(C).

    More about this item

    Keywords

    Crude oil prices; Crude oil futures; Q400; Energy;
    All these keywords.

    JEL classification:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:iaecre:v:16:y:2010:i:3:p:257-268:10.1007/s11294-010-9266-z. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.