Showing papers on "Brent Crude published in 1999"
TL;DR: This article found that after 1986, oil price movements explained a larger fraction of the forecast error variance in real stock returns than do interest rates, and that oil price volatility shocks have asymmetric effects on the economy.
1,782 citations
TL;DR: This paper examined the relationship between refinery margins traded on paper using petroleum futures (the paper refinery) and the physical trade of crude oil into the United States and found that the 2-month 3:2:1 crack spread Granger-caused crude oil imports and that this causality is unidirectional.
Abstract: This article examines the relationship between refinery margins traded on paper using petroleum futures (the paper refinery) and the physical trade of crude oil into the United States. It stems from the authors' desire to find a short-term leading indicator for oil tanker transportation demand. Computations of a 3:2:1 crack spread were constructed using daily observations of second- and third-nearby unleaded gasoline and heating oil futures contracts traded on the New York Mercantile Exchange and spot Brent crude oil prices. The crack spread represents the margin between the cost of crude oil feed stock today and the value of the products produced by a refinery in the future. Unit root tests on each of the time series found crack spreads to be stationary while crude oil imports were found to be nonstationary. As the two series were found to be integrated of different order, cointegration analysis of the two series was not deemed appropriate. Instead, linear relationships between crack spreads and imports were examined using causality tests. It was found that the 2-month 3:2:1 crack spread Granger-causes crude oil imports and that this causality is unidirectional. The significance of these findings lies in the fact that other industries, like tanker shipping, derive their demand from the demand for, and trade in, petroleum. Crack spreads, therefore, can provide a leading indicator for short term developments in tanker demand. For a chartering manager who has ships on the spot market, crack spreads can help him/her anticipate demand developments and influence vessel deployment and chartering decisions.
14 citations