Linkages Between Shanghai and Global Crude Oil Futures Markets

Gaige Zhang, Liyan Han and Jiayu Jin

Journal of Futures Markets, 2025, vol. 45, issue 12, 2403-2433

Abstract: This study investigates the relationships between Shanghai crude oil futures (International Exchange [INE]) and Brent, West Texas Intermediate (WTI), and Oman crude oil futures from March 26, 2018, to January 16, 2024. We identify three long‐term equilibrium relationships among the four oil futures at a daily frequency, while a unique equilibrium exists at a weekly frequency. Notably, only INE reacts to deviations from this unique equilibrium on a weekly basis. In terms of volatility, both daily and weekly, INE engages in mutual risk transfer with Brent, WTI, and Oman. However, INE exhibits lower correlations with the other three futures compared with their high correlations with each other. This aligns with the observation that INE is less volatile under extreme shocks, which leads to an arbitrage strategy based on INE and Oman, yielding an annualized return of 22.89% with a maximum drawdown of 18.85%.

Date: 2025
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