Showing papers on "Brent Crude published in 2013"

Application of ARIMA Model in Short-Term Prediction of International Crude Oil Price

Abstract: International crude oil price is the referential scale of spot crude oil price and refined oil price. This paper made an analysis and prediction of Brent crude oil price by ARIMA model based on its price data from November 2012 to April 2013. It indicated that model ARIMA (1,1,1) possessed good prediction effect and can be used as short-term prediction of International crude oil price.

The Price of Oil – Will it Start Rising Again?

Abstract: Following a sharp drop amidst the global economic crisis and a subsequent recovery, the spot price of crude oil has been broadly stable for the past couple of years This paper discusses the factors that drive oil demand and supply and, hence, the price of the resource A set of oil demand equations is estimated for OECD and non-OECD countries, which is then combined with assumptions about the behaviour of supply to analyse the impact of a range of macroeconomic and policy scenarios on the future oil price path The scenario analysis suggests that a return of world growth to slightly below pre-crisis rates would be consistent with an increase in the price of Brent crude to far above early-2012 levels by 2020 This increase would be mostly driven by higher demand from non-OECD economies – in particular China and India The expected rise in the oil price is unlikely to be smooth Sudden changes in the supply or demand of oil can have very large effects on the price in the short run

The role of fundamentals and financialisation in recent commodity price developments: An empirical analysis for wheat, coffee, cotton, and oil

Abstract: In the context of recent commodity price hikes, the financialisation of commodity derivative markets, reflected in the increased presence of financial investors and new financial products such as commodity index and exchange traded funds has been controversially discussed. Many studies focus on the effect of passive index investors on rising commodity prices, but hardly look at the effect of the diverse group of money managers where an important share engages in technical and trend following trading strategies and thus has the potential to push prices up and down. This is problematic given the increased importance of money managers and more generally of active trading strategies in recent years. We analyze for the commodities coffee, cotton, soft red winter and hard red winter wheat and WTI and Brent crude oil the effect of both types of financial investors within a Vector Autoregressive (VAR) model framework, conducting Granger (non-)causality tests and impulse response analyses for the period June 2006 to October 2012. We complement the bivariate model approach, which looks at the lead-lag relationship between financial investors' positions and commodity returns, with a multivariate approach. We thus assess financial investors' positions in addition to a range of fundamental and macroeconomic variables which may influence commodity prices. In both models, index investors' net long positions are not found to have a significant effect on commodity returns in recent years. In the multivariate model money managers' net long positions have a statistically significant and large effect on returns for all commodities; in the bivariate model they only have an effect for coffee. In the bivariate model, we also find that commodity returns drive money managers' positions, which may indicate the presence of trend following trading strategies. Overall, our results support the hypothesis of financialisation of commodity derivative markets.

Fuel price transmission mechanisms in Portugal

Abstract: This study aims to analyse the behaviour of fuel prices at the pump (unleaded gasoline and diesel) in Portugal, relative to positive and negative variations in Brent crude oil price. Applying an Autoregressive Distributed Lags (ARDL) model to weekly time series data for the period of January 2004 through May 2009, we detected some signs of asymmetry in the transmission price mechanism. However, these patterns are not statistically significant enough to reject hypotheses of symmetry in the price adjustment mechanisms of fuel in Portugal.

Stock market and crude oil relationship: A wavelet analysis

Abstract: Financialisation of crude oil and its frequent inclusion into investment portfolios raise the demand for analysis of crude oil and stock market indices relationship at various time scales. In this paper, the relationships between crude oil and stock markets in three Islamic stock market indices and three non-Islamic indices are examined by using a time-scale decomposition based on the theory of wavelets. This study employs daily closing price data of Brent crude oil index and the six stock market indices. The oil and stock return series are first decomposed into different time components and then their relationships are investigated over different time scales through wavelet’s estimated correlations. We also characterized the crude oil and stock market relationship for different timescales in an attempt to disentangle the possible existence of comovement during the global financial crisis. The results mainly show evidence of significant time scale effects on the behavior of the oil-stock market links, and that investors should consider these effects when diversifying their portfolios of stocks into the oil asset. The paper specifies the investment horizons that should be considered to maximize diversification properties of crude oil. These findings also have important implications for risk management, monetary policies to control oil inflationary pressures and fiscal policy in oil-exporting countries.

Modelling the fluctuations of Brent oil prices by a probabilistic Markov chain

Abstract: Modelling of crude oil prices has been extensively made. In this paper, we concluded that the Brent oil prices follow a Markov chain. Moreover, we predict the model of fluctuating these prices from January 2004 to July 2010 by integrating the limit probability distribution of a Markov chain and Gumbel Max distribution. In this model, we analyze the trends of Brent oil prices from the short term to middle and long terms.

Stock market and crude oil relationship: A wavelet analysis

Abstract: Financialisation of crude oil and its frequent inclusion into investment portfolios raise the demand for analysis of crude oil and stock market indices relationship at various time scales. In this paper, the relationships between crude oil and stock markets in three Islamic stock market indices and three non-Islamic indices are examined by using a time-scale decomposition based on the theory of wavelets. This study employs daily closing price data of Brent crude oil index and the six stock market indices. The oil and stock return series are first decomposed into different time components and then their relationships are investigated over different time scales through wavelet’s estimated correlations. We also characterized the crude oil and stock market relationship for different timescales in an attempt to disentangle the possible existence of comovement during the global financial crisis. The results mainly show evidence of significant time scale effects on the behavior of the oil-stock market links, and that investors should consider these effects when diversifying their portfolios of stocks into the oil asset. The paper specifies the investment horizons that should be considered to maximize diversification properties of crude oil. These findings also have important implications for risk management, monetary policies to control oil inflationary pressures and fiscal policy in oil-exporting countries.

An update to the comovements of commodity, equity and USD

Abstract: The current financial crisis has large impact on market structure. This research focused on the dynamic comovements among four assets: 1 month gold futures, 1 month Brent crude oil futures, USD Index and S&P500 Index. The study further examines causalities among assets using the linear Granger causality test and the nonlinear Granger causality test, and the effect of shocks on the assets price movements using the Safe Haven Analysis. As results, we found differences in the dynamic comovements among assets before and during the current financial crisis. Further using the findings of the analysis, new models are constructed. The predictions of our models, using three different methods: stable coefficients, moving window, and expanding window methods, are compared with two benchmark models. We further compute CPS, MAE and MSPE to compare the predictions. As results, our models provide outstanding accurate predictions and the predictions are most accurate using the moving window method.

An Empirical Study on the Dynamic Relationship between Brent Oil and Large Company Stock Prices of the Shanghai and Korea Stock Markets

Abstract: This paper addresses the existence of dynamic relationships between Brent oil price and large company stock prices of the Shanghai stock...

Information Transmission of Volatility between WTI and Brent Crude Oil Markets

Abstract: Transmission mechanisms of volatility between two crude oil markets (WTI and Brent markets) have drawn the attention of numerous academics and practitioners because they both play crucial roles in portfolio and risk management in crude oil markets. In this context, we examined the volatility linkages between two representative crude oil markets using a VECM and an asymmetric bivariate GARCH model. First, looking at the return transmission through the VECM test, we found a long-run equilibrium and bidirectional relationship between two crude oil markets. However, the estimation results of the GARCH-BEKK model suggest that there is unidirectional volatility spillover from the WTI market to the Brent market, implying that the WTI market tends to exert influence over the Brent market and not vice versa. Regarding asymmetric volatility transmission, we also found that bad news volatility in the WTI market increases the volatility of the Brent market. Thus, WTI information is transmitted into the Brent market, indicating that the prices of the WTI market seem to lead the prices of the Brent market.

Short-Term Influence of the Oil Price on Stock Prices from the Bucharest Stock Exchange

Abstract: In the last decades, several studies revealed the significant impact of oil price variation not only on the real economic activity but also on the financial markets evolutions. Such relations are affected by some particularities of the national economies. In this paper we examine the impact of the oil price on the Romanian capital market evolution from January 2000 to February 2013. In our analysis we employ daily values of the Brent oil price and of BET C, one of the main indexes of Bucharest Stock Exchange. A GARCH model allows us to investigate the effects of the oil price fluctuations on returns and volatility of the stock prices. We split our samples of data in three sub-samples in order to capture the influence of three major processes that affected the Romanian economy: the last stage of transition to a capitalist system, the transformations induced by the adhesion to European Union and the global crisis. Our results revealed significant changes on the relation between oil price and stock prices that occurred during these three periods of time.

High Frequency Trading of Brent Crude Price

Abstract: A review of high-frequency and pair trading on Brent crude oil is performed, followed by a proposal of empirical study. The oil market is faced with high levels of which makes it appropriate for this investigation. The objective is to investigate the literature on both high-frequency and pair trading and confirmed its predictive power as an investment tool. Our findings showed that although high-frequency trading had increased in the stock market but they are not significant in other commodity markets, due to its higher liquidity requirements.

The Impact of Oil Prices On Economic Activity in Administrated Price Structure: the case of Tunisia

Abstract: This article has for a core objective the handling of the established relation between oil price variation and certain macroeconomic variables, in this particular case GDP, RMM, CPI, Ex-factory price. The study in Tunisia is based on quarterly and monthly data from the period going from 2000 to 2011 revealed three important facts. First, it showed at the level of the quarterly analysis that the Tunisian authority succeeded in limiting the effect of crude oil price shock, it was approved through an impulse analysis of the dynamic responses, a second important result was revealed at the level of the quarterly analysis and the established long-term relation which showed that the GDP or the industrial production positively and significantly depend on Brent oil price and on the inflation in a structure of administered price. Second at the level of the monthly analysis, the conducted study allowed us to identify the nature of inflation, which is said to the production cost through introducing a new variable which is ex-factory price. Third, the conducted study allowed us to study the asymmetric relation between Brent oil price and the monetary mechanism in an administered price regime.

Synchronization of Crude Oil Prices Cycle and Business Cycle for the Central Eastern European Economies

Abstract: The main purpose of the paper is to study the degree to which the Brent crude oil price cycle is correlated and synchronized with business cycle in a set of chosen Central Eastern European (CEE) economies. To indentify the oil price cycle and business cycles for chosen individual countries the Markov-switching autoregressive model (MS-AR) is used. The identification of the smoothed probabilities of being in regime 1 and regime 2 enables the calculation of correlation coefficients between those probabilities and the concordance index to evaluate the synchronization of oil price cycle and business cycles for the CEE economies.

China: The Ultimate Decider on Crude Oil Prices

Abstract: The single most important driver of shifting dynamics in world oil markets is China It alone will continue to account for most of the world demand growth throughout this decade and probably the next By October 2013, China’s net oil imports are projected to exceed those of the United States on a monthly basis and by 2014 on an annual basis, making it the largest importer of oil in the world In order to satisfy its thirst for oil, China has aggressively used its financial reserves to offer billions in development credit, underwritten with oil, especially in Africa, Latin America, and even Russia From energy security point of view, one of the biggest threats to maintaining a stable oil price in the long run will be satisfying growth in Chinese demand That is what is putting pressure on prices An optimistic oil price could range from $100 to $130a barrel However, this paper will argue that in a supply-constrained world and with OPEC’s spare capacity continuing to shrink, oil is unlikely to spend much time hovering around that price range It will suggest that prices will continue to spike over the next five years occasionally reaching $200/barrel in order to keep oil demand in check The paper will also argue that the global economy can at most sustain oil prices that represent just about 6% of GDP translating into $137 a barrel of Brent crude by 2015, $156 by 2020, and $241 by 2035 It will conclude that China’s steep-rising oil demand, its search for new sources of oil and also its acquiring of oil assets around the world will ultimately give it the final say on the oil price globally

Synchronization of Crude Oil Prices Cycle and Business Cycle for the Central Eastern

Abstract: A b s t r a c t. The main purpose of the paper is to study the degree to which the Brent crude oil price cycle is correlated and synchronized with business cycle in a set of chosen Central Eastern European (CEE) economies. To indentify the oil price cycle and business cycles for chosen individual countries the Markov-switching autoregressive model (MS-AR) is used. The identification of the smoothed probabilities of being in regime 1 and regime 2 enables the calculation of correlation coefficients between those probabilities and the concordance index to evaluate the synchronization of oil price cycle and business cycles for the CEE economies. K e y w o r d s: Markov switching model, crude oil prices, business cycle, price cycle.

Study on international and domestic energy price volatilities and their interrelationship based on VAR model and impulse function

Abstract: The paper analyses the interrelationship between Brent and Daqing oil price,BJ and Qinhuangdao steam coal price by using VAR model and Impulse response function.The result shows that there are long term equilibrium relationships between international and domestic energy prices.Brent oil price is the granger reason for steam coal prices and Daqing oil price.While BJ steam coal price and Daqing oil price is the granger reason for domestic coal price,and Daqing oil price is the granger reason for BJ steam coal price.The impulse between energy prices is positive and increases initially and decreases afterwards.The contribution of domestic oil price to domestic coal price equals to total contribution of international oil and steam coal price,which is nearly 42%.And domestic oil price has 3times impulse effect on BJ steam coal price than Brent oil price.While Brent oil price makes about 37%contribution to Daqing oil price fluctuation.This means that China,s energy market in a weak position in the international energy market.We need to strengthen energy prices early warning mechanism and energy reserves mechanisms.

Gold Price and Exchange Rate Volatility: Effects of Economic Sanctions

Abstract: The gold market has recently attracted much attention and gold prices have fluctuated over the past few years. Therefore, the aim of this study is investigate and analyze the trend of gold prices over the past five years in Iran. The importance of this topic is coming from uncertainty and volatility of the gold market, gold excitement and lack of a correct analysis of the market trends with reference to the probable factors which affect the gold price. The studys period refers to the ended five-year in December 2012. This research from methodological point of view is a descriptive-perspective analysis that examines the influence of variables such as the gold price on the market, the official exchange rate and non-official rate on the Irans market, the price of Brent crude oil, the global rate per ounce gold and foreign economic sanction. Vector auto regression model is used to analyze the results of the study. The results indicate that gold price is affected from exchange rates fluctuations and gold global rate, it is also noteworthy to mention that the most important factors affecting the recent volatility in the Irans gold market and the exchange rate is the economic sanctions which have been imposed against Iran.

Value-at-Risk: Risk assessment for the portfolio of oil and gas producers

Abstract: During the last decade, Value-at-Risk (VaR) has become the most common tool to measure the exposure to short term financial risk for companies in the oil industry, in common with most other sectors. However, VaR has been criticized after the financial crisis for providing too optimistic risk estimates and allowing portfolio managers with inflated credit lines. The crisis hit companies extracting natural resources hard, and the oil and gas industry experienced a severe fall in prices, with Brent oil dropping from 40 to below 0 in just 6 months. During events like the financial crisis, companies need to rely on precise risk estimates to adjust their positions. We show that when asset prices are highly correlated, a typical feature in the oil and gas industry, companies are vulnerable to inaccurate estimates. The findings are also compared to a theoretical study using Monte Carlo.

Relationship between Dollar Exchange Rate, Monetary Liquidity and International Oil Price

Abstract: This paper provides an analysis on three variables based on observation and experiment: Brent oil prices, the dollar exchange rate and the dollar liquidity (M2), and verifies their interactions relations. The analysis shows that the Granger reason of Brent oil price is the dollar exchange rate and extends the Krugmans achievement. The concept of dollar liquidity (M2) illustrates the important role of oil price in global economic system. China should guide the oil price to a reasonable interval by making full use of the top of oil consumption status in the world.