What Does the Convenience Yield Curve Tell Us about the Crude Oil Market?
Ron Alquist,
Gregory Bauer and
Antonio Diez de los Rios
Staff Working Papers from Bank of Canada
Abstract:
Using the prices of crude oil futures contracts, we construct the term structure of crude oil convenience yields out to one-year maturity. The crude oil convenience yield can be interpreted as the interest rate, denominated in barrels of oil, for borrowing a single barrel of oil, and it measures the value of storing crude oil over the borrowing period. We show that the convenience yield curve is well explained by a level and a slope factor. Consistent with the theory of storage, convenience yields have predictive power over future crude oil inventories, production, global real economic activity and the price of oil.
Keywords: Asset Pricing; International topics (search for similar items in EconPapers)
JEL-codes: C C5 C53 G G1 G12 G13 Q Q4 Q43 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2014
New Economics Papers: this item is included in nep-ene
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Citations: View citations in EconPapers (15)
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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:14-42
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