Inventory, Consumption, Volatility and the Crude Oil Forward Curve

Project Member(s): Nikitopoulos Sklibosios, C.

Start year: 2014

Summary: Crude oil is the world¿s most actively traded commodity and it has experienced extreme price volatility over the past decade. This has aroused interest in understanding the factors driving crude oil prices and volatility. The prices at which the market is willing to transact futures business characterise the crude oil forward curve. We investigate the impact of key determinants such as inventory, consumption and volatility on the crude oil forward curve and characterise the short and long term dynamics of their relationships. These results are critical to pricing, hedging and trading in commodity markets, and hence to investment and risk management strategies undertaken by hedge funds and other market participants.

Keywords: Crude oil forward curve, inventory, consumption, crude oil volatility

FOR Codes: Financial Econometrics, Financial Services not elsewhere classified, Financial Economics, Expanding Knowledge in Economics, Financial econometrics

Acknowledgement of Country

UTS acknowledges the Gadigal people of the Eora Nation, the Boorooberongal people of the Dharug Nation, the Bidiagal people and the Gamaygal people, upon whose ancestral lands our university stands. We would also like to pay respect to the Elders both past and present, acknowledging them as the traditional custodians of knowledge for these lands.