Do Speculators Drive Crude Oil Futures Prices?

By Bahattin Büyüksahin, Jeffrey H. Harris. 2011

299 citations recorded by the source corpus.

Abstract The coincident rise in crude oil prices and increased number of financial participants in the crude oil futures market from 2000-2008 has led to allegations that “speculators” drive crude oil prices. As crude oil futures peaked at $147/bbl in July 2008, the role of speculators came under heated debate. In this paper, we employ unique data from the U.S. Commodity Futures Trading Commission (CFTC) to test the relation between crude oil prices and the trading positions of various types of traders in the crude oil futures market. We employ Granger Causality tests to analyze lead and lag relations between price and position data at daily and multiple day intervals. We find little evidence that hedge funds and other non-commercial (speculator) position changes Granger-cause price changes; the results instead suggest that price changes precede their position changes.

Subfields: Economics and Econometrics, Renewable Energy, Sustainability and the Environment

View Paper: https://www.semanticscholar.org/paper/de1bbe4f7c2e0d716b7ddc10a9f8e9eb3a78bbf8

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Citations in the corpus

Testing the Masters Hypothesis in Commodity Futures Markets (2012, background): “Buyuksahin and Harris (2011) do not find a statistical link between swap dealers positions and changes in crude oil futures prices.”
Convective Risk Flows in Commodity Futures Markets (2015, background): “…(2009), Irwin, Sanders, and Merrin (2009), Sanders, Irwin, and Merrin (2010), Stoll and Whaley (2010), Brunetti, Buyuksahin, and Harris (2011), Buyuksahin and Harris (2011), and Hamilton and Wu (2013), who argue that there is little evidence of CIT positions being either correlated with or…”
On the links between stock and commodity markets' volatility (2013, background): “1 Recent references include Büyükşahin and Harris (2011), Büyükşahin et al. (2008), Capelle-Blancard and Coulibaly (2011), Du et al. (2011), Eckaus (2008), Irwin and Sanders (2012), Khan (2009), Manera et al. (2012), Masters and White (2009), Stout (2011), Valiante (2011), and Vivian and Wohar…”
Financialization and Structural Change in Commodity Futures Markets (2012, background): “Buyuksahin and Harris (2011) do not find a statistical link between swap dealers positions and changes in crude oil futures prices.”
Dynamic spillovers between commodity and currency markets (2015, background): “…to different macroeconomic fundamentals (Erb and Harvey, 2006; Batten et al., 2010; Chen, 2010)5, (ii) do not share a long-run equilibrium relation (Sari et al., 2010), and (iii) futures trading strategies, such as hedging and speculation, are commodity-specific (Büyükşahin and Harris, 2011).”
The Financialization of Commodity Markets (2014, background): “An early wave of studies examine this by testing whether CIT position changes are either contemporaneously correlated with futures price changes or Granger-cause changes in futures prices (Brunetti and Büyükşahin, 2009; Brunetti, Büyükşahin and Harris, 2011; Büyükşahin and Harris, 2011; Irwin and Sa”
Effects of Index-Fund Investing on Commodity Futures Prices (2014, unknown): “Buyuksahin and Harris (2011) used proprietary CFTC data on daily positions broken down by noncommercials, commercials, swap dealers, hedge funds, and floor broker-dealers.”
"Momentum Strategies in Futures Markets and Trend-following Funds" (2013, unknown): “Brunetti and Büyükşahin (2009) show that speculative activity is not destabilizing for futures markets, whereas Büyükşahin and Harris (2011) find that hedge funds and other speculator position changes do not Granger-cause changes in the crude oil price.”
Oil prices and financial stress: A volatility spillover analysis (2015, unknown): “Büyükşahin and Harris (2011) also support this result.”