The WTI/Brent oil futures price differential and the globalisation-regionalisation hypothesis

Michail Filippidis, Renatas Kizys, George Filis and Christos Floros

International Journal of Banking, Accounting and Finance, 2019, vol. 10, issue 1, 3-38

Abstract: This study examines the globalisation-regionalisation hypothesis in the WTI/Brent crude oil futures price differential by considering a set of potential crude oil-market specific and oil futures market specific determinants at 1, 3 and 6 months to maturity contracts. We employ monthly data over the period 1993:1-2016:12. Our results show that different determinants explain the spread between the WTI and Brent futures prices at different maturities. In the shorter-run maturities (1-month and 3-month) we find that spreads of the convenience yield, oil production, open interest and trading volume exercise significant effects in the WTI/Brent futures price differential. By contrast, for longer-run maturities (6-month), spreads of the oil production, oil consumption and open interest seem to exercise the most significant effects. We further provide evidence of a regionalised oil futures market over the short-run. The findings of this study provide valuable information to energy investors, traders and hedgers.

Keywords: Brent; convenience yield; globalisation-regionalisation hypothesis; oil futures differential; WTI. (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (2)

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Working Paper: The WTI/Brent oil futures price differential and the globalisation-regionalisation hypothesis (2018)
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