Balancing World Oil Markets and Understanding Contango and Inventories: The Changing Nature of World Oil Markets

Jennifer Considine and Abdullah Aldayel
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Abdullah Aldayel: King Abdullah Petroleum Studies and Research Center

Discussion Papers from King Abdullah Petroleum Studies and Research Center

Abstract: The general theory of storage suggests that the level of inventories is a key factor in determining the structure of the oil futures curve, or the basis, over time. The basis is the difference between the price of oil in the futures market and the price of oil in the spot market. As an indicator of future price movements, the basis follows a different dynamic when inventories are in scarce supply or in surplus. This means that there are several different market states that reflect different underlying crude oil market conditions.

Keywords: Markov Switching regime model; Oil markets; Oil price (search for similar items in EconPapers)
Pages: 31
Date: 2020-07-06
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Persistent link: https://EconPapers.repec.org/RePEc:prc:dpaper:ks--2020-dp15

DOI: 10.30573/KS--2020-DP15

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