Trend Contagion in WTI and Brent Crude Oil Spot and Futures Prices - A Spread and Correlation Analysis

摘要

This article examines the interconnectedness of WTI and Brent prices on dierent resolutionsof price movements. Firstly, within a multivariate BEKK framework we identify highbut volatile correlations with recurring highs around 0.8 and multiple periods of decoupling.OPEC meetings increase the correlation. Secondly, linear `1 trends reveal that long-termmovements of WTI and Brent are driven by the same dynamics, conrming the `globalizedmarket' hypothesis. OPEC meetings have only little impact on long-term price trends.Thirdly, we nd leading eects of WTI over Brent by short-term trends of several days, especiallyin negative direction. These trends have an asymmetrical eect on volatility; negativetrends cause a stronger increase than positive trends. These ndings are of interest to policymakers as well as hedging strategies of crude oil portfolios and provide insight to long-termmovements of crude prices. We provide evidence that OPEC meetings cause short-termmarket reactions but have little eect on long-term price developments.