Futures Prices are Useful Predictors of the Spot Price of Crude Oil

Reinhard Ellwanger and Stephen Snudden

The Energy Journal, 2023, vol. 44, issue 4, 65-82

Abstract: How well do futures prices forecast the spot price of crude oil? Contrary to the established view, futures prices significantly improve upon the accuracy of monthly no-change forecasts. This results from two innovations. First, we document that independent of the construction of futures-based forecasts, longer-horizon futures prices have become better predictors of crude oil spot prices since the mid-2000s. Second, we show that futures curves constructed using end-of-month prices instead of average prices have consistently been able to generate large accuracy-improvements for short-horizon forecasts of average prices. These findings are remarkably robust and apply to all major crude oil benchmarks.

Keywords: Forecasting and prediction methods; Oil price forecast; Futures market (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://journals.sagepub.com/doi/10.5547/01956574.44.4.rell (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:sae:enejou:v:44:y:2023:i:4:p:65-82

DOI: 10.5547/01956574.44.4.rell

Access Statistics for this article

More articles in The Energy Journal
Bibliographic data for series maintained by SAGE Publications ().