Causality in crude oil prices

Björn Hagströmer, Szymon Wlazlowski

Research output: Preprint or Working paperWorking paper

Abstract

Economic media inform on prices of three well established crude oil benchmarks: Brent, WTI and Dubai Fateh. The relevance of these is however declining with their low output - motivating investigation of the pricing dynamics. We apply Granger causality tests to study the price dependencies of 32 crude oils. The aim is to establish what crudes are setting the prices and what crudes are just following the general market trends. The investigation is performed globally as well as for different quality, geographical and organisational segments. The results indicate that crude oil price analysts should follow at least four different crudes that are good price indicators. WTI and Brent still lead the market, but they are not the only crude prices worth paying attention to. In particular, Russian Urals drives global prices in a significant way, and Iran Seri Kerir is a significant price setter within OPEC. Dubai Fateh does not display any significant influence as a price setter, which confirms the lack of dominant benchmark within the segment of medium quality crudes.
Original languageEnglish
Place of PublicationBirmingham
PublisherAston University
ISBN (Print)9781854496843
Publication statusPublished - Feb 2007

Bibliographical note

RP0706

Keywords

  • granger causality
  • crude oil
  • benchmark
  • West Texas Intermediate
  • Europe Brent
  • Dubai Fateh
  • Russian Urals
  • Iran Seri Kerir
  • price dynamics

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