The impact of informed trading on liquidity in Chinese crude oil futures

Zihuang Huang, Shaokun Wang and Kaifeng Li

Energy Economics, 2025, vol. 150, issue C

Abstract: This paper uses 1-min transaction data of Chinses crude oil futures (SC) to measure the informed trading and empirically examine its impact on liquidity. The paper finds that informed trading significantly increases liquidity of SC, and market stress plays an intermediary role in the process of informed trading affecting liquidity. Informed trading further improves liquidity by reducing market stress. In addition, the effect is more pronounced during night trading session and the period of high climate policy uncertainty. Further study finds that price fluctuation of Brent and WTI crude oil serves as a moderator in this process. Specifically, the price fluctuation of Brent crude oil has a positive moderating effect on the relationship between informed trading and liquidity, while the price fluctuation of WTI crude oil has a negative moderating effect. Robustness tests, including replace the explained and explanatory variables, using current explanatory variables, and changing the rolling window, confirm the consistency of these findings. Insights gleaned from the findings are useful for regulation policy formulation and market investment decision-making.

Keywords: Crude oil futures; Informed trading; Liquidity; Market stress (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:150:y:2025:i:c:s0140988325006590

DOI: 10.1016/j.eneco.2025.108832

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