Which risk factors drive oil futures price curves?

Matthew Ames, Guillaume Bagnarosa, Tomoko Matsui, Gareth W. Peters, Pavel V. Shevchenko

Research output: Contribution to journalArticle

Abstract

We develop extensions that introduce regression structure to the multi-factor stochastic models of commodity futures price term structure dynamics. We demonstrate the accuracy with which these models can be calibrated to oil futures data and how they improve on existing models both in model fit and in model interpretation. We found leading observable factors that contribute to explaining the term structure of oil futures, in the presence of long and short term stochastic factors, included the dollar index, inventories, commodity indices and risk aversion associated to financial intermediaries. Furthermore, we determine the time frame on which these factors are explanatory.
Original languageEnglish
Article number104676
Number of pages16
JournalEnergy Economics
Volume87
Early online date17 Jan 2020
DOIs
Publication statusPublished - 1 Mar 2020

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Keywords

  • Crude oil futures
  • Theory of storage
  • Theory of normal backwardation
  • Hedging pressure
  • Futures Term structure

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