SWP on WTI in the FT
Greg Meyer at the Financial Times wrote a piece covering a just-released study I did analyzing the performance of the CME-NYMEX WTI crude futures and ICE Brent crude futures during the financial crisis.
The full study is here: scroll down to the bottom for the PDF.
Cliff’s Note version: (a) the financial crisis was a period of unprecedented volatility in the oil markets, (b) the hedging performance of both pricing benchmarks declined during the crisis, (c) the crisis affected front month WTI more acutely than second month WTI or either front or second month Brent, (d) the performance of second month WTI was comparable to that of both Brent contracts, (e) the most likely cause of the observed price behavior was the major shock to demand, which resulted in a sharp increase in oil in store at Cushing, (f) spread behavior was not something peculiar to WTI, because the fundamental shock affected West Texas Sour crude (also tributary to Cushing) too, (g) oil stocks and WTI spreads continued to covary positively, as you’d expect, though the relationship was weaker during the period of the crisis, but (h) oil stocks and Brent spreads covaried negatively during the crisis.
[…] This post was mentioned on Twitter by CMEGroup, Tom Fowler. Tom Fowler said: RT @CMEGroup: The Streetwise Professor released his study on WTI Crude: #energy #futures #commodities: http://ow.ly/UgXB […]
Pingback by Tweets that mention Streetwise Professor ยป SWP on WTI in the FT -- Topsy.com — January 8, 2010 @ 12:41 pm
Im curious about the Brent spreads not following the fundamentals. Does this indicate some type of market manipulation?
Comment by Surya — January 8, 2010 @ 9:56 pm