Tuesday 25th November 2014
NEWS TICKER: November 24TH 2014: This morning, US time, President Obama accepted a letter of resignation from US Secretary of State for Defence, Chuck Hagel, who says he will service until his successor is confirmed by the US Senate. “You should know I did not make this decision lightly. But after much discussion, the President and I agreed that now was the right time for new leadership here at the Pentagon,” he wrote in an official statement announcing his resignation - .Bank of America Corporation today announced it will report its fourth-quarter 2014 financial results on Thursday, January 15th 2015. The results are scheduled to be released at 7am ET, followed by an investor presentation at 8:30am ET - The Straits Times Index (STI) ended -4.79 points lower or -0.14% to 3340.53, taking the year-to-date performance to +5.55%. The FTSE ST Mid Cap Index gained +0.23% while the FTSE ST Small Cap Index gained +0.34%. The top active stocks were Forterra Trust (+20.97%), SingTel (-0.77%), CapitaLand (+1.53%), DBS (-0.45%) and Suntec REIT (-0.52%). Outperforming sectors today were represented by the FTSE ST Technology Index (+0.88%). The two biggest stocks of the FTSE ST Technology Index are Silverlake Axis (+1.22%) and STATS ChipPAC (+1.12%). The underperforming sector was the FTSE ST Telecommunications Index, which declined -0.68% with SingTel’s share price declining -0.77% and StarHub’s share price unchanged. The three most active Exchange Traded Funds (ETFs) by value today were the IS MSCI India (+0.26%), SPDR Gold Shares (+0.47%), STI ETF (+0.30%) - Moody's Investors Service has today upgraded SCHMOLZ + BICKENBACH AG's (S+B) corporate family rating (CFR) to B2 from B3 and probability of default rating (PDR) to B2-PD from B3-PD. The rating of the senior secured notes due 2019 issued by SCHMOLZ + BICKENBACH Luxembourg S.A. (a wholly owned subsidiary of S+B) is also upgraded to B2 from B3. The outlook on the rating is stable. -- The Nasdaq Stock Market says that trading was halted today in MOL Global Inc at 09:10:08 Eastern Time for "additional information requested" from the company at a last price of $4.09. Trading will remain halted until MOL Global Inc. has fully satisfied Nasdaq's request for additional information - The ICE January Brent futures contract settled $1.03 higher at $80.36/b Friday after a surprise interest rate cut by the Chinese central bank lifted hopes the world's second largest economy could grow faster. Crude benchmarks on both sides of the Atlantic closed at their highest levels since November 12. NYMEX January crude futures ended the session 66 cents higher at $76.51/b.

Bunking the myth of oil price hikes and speculation

Monday, 05 March 2012
Bunking the myth of oil price hikes and speculation The question of whether speculators are responsible for the recent spikes in the price of oil has been one of the most hotly debated topics in the oil market in the last few years. Most recently it has prompted US regulators to put limits on some speculative positions and re-define what they consider to be speculative positions. Vanja Dragomanovich met up with Rita D'Eclessia, professor at the Department of Economic Theory and Quantitative Methods for Political Choices at the University of Rome and a visiting lecturer at Birkbeck University in London, who has run these theories through a set of mathematical tests and has produced some slightly surprising results. http://www.ftseglobalmarkets.com/

The question of whether speculators are responsible for the recent spikes in the price of oil has been one of the most hotly debated topics in the oil market in the last few years. Most recently it has prompted US regulators to put limits on some speculative positions and re-define what they consider to be speculative positions. Vanja Dragomanovich met up with Rita D'Eclessia, professor at the Department of Economic Theory and Quantitative Methods for Political Choices at the University of Rome and a visiting lecturer at Birkbeck University in London, who has run these theories through a set of mathematical tests and has produced some slightly surprising results.

Vanja Dragomanovich (VD): Why has the issue of oil prices attracted so much attention outside the actual oil market?
Rita D'Eclessia (RD’A): Analysis and empirical evidence shows that four out of the last five global recessions were preceded by oil shocks. In the case of the 2007-2008 crisis oil prices cannot be ignored as a culprit of what happened: the oil price increased over 300% and this caused the annual fuel bill of OECD countries to increase dramatically. Exceptional oil price volatility affects many economic variables and their related markets. Oil price fluctuations affect consumers, producers and marketers, especially in terms of costs, incentives to invest in technology and trading strategies. The importance of oil prices is further increased by the fact that other forms of energy such as coal, gas, and, to a lesser extent, electricity are sometimes priced in order to compete with oil, so that oil price fluctuations become reflected in broader energy price changes.

VD: As part of your research you looked into the link between the volatility in oil prices and the involvement of speculators in the market. Can you talk us through your findings?
RD’A: Economists and financial experts are divided over who they think was responsible for driving crude oil prices to their peaks in the first half of 2008. Basically trend-following speculation and institutional commodity index-buying have reinforced the output pressure on prices. In my research I tried to identify which economic and financial variables provide insights into understanding oil price dynamics. Our proposition was that the changes in the oil price are an example of an economic variable which is largely unpredictable. In such a context the role of futures markets, considered as a measure of the speculative component in the market, is also investigated. However, our conclusion was that using the data we had, we could not find any evidence that the oil price depends on speculative activity in the market.



VD: What data did you base your research on? For instance, how did you define speculators and how did you distinguish between speculative and non-speculative activity? Was your research based on information from several commodity exchanges?
RD’A: I set up an econometric model to capture possible long run equilibrium between some macroeconomic variables and some financial variables. The data used to measure speculation is the number of the benchmark US futures oil contracts, the West Texas Intermediate (WTI) spot crude oil held by speculators; this is data published by the US Commodities Futures Trading Commission (CFTC).
I used monthly West Texas Intermediate spot oil prices between 1993 and 2011 and assumed that speculators are participants who trade oil as an investment and not to hedge.

VD: Once you established that the link between speculative activity and oil price volatility was weak which other factors proved most influential in the oil market?
RD’A: Surprisingly, by far the strongest influence is the price of gold, followed by the strength of the euro against the dollar. For instance we found that for any one basis point move in the euro/dollar exchange rate the oil price moved by $2.8 dollars. Given that the euro was only introduced in 2000 we ran the analysis using the Deutschmark from 1993 till the introduction of the euro.
In all, we tried six different variables to try and find some meaningful correlation. We tried open interest, US interest rates, imports of WTI and WTI oil futures, all of which proved not to have a strong impact on the oil market.

VD: Your analysis was primarily statistical. However, in that period of time oil would have also moved for other reasons such as geopolitical crises, conflicts in the Middle East, economic crises, and political changes in Europe. How do those factors feature in your analysis?
RD’A: That is correct, but we can infer the influence of political events through the fluctuations of the dollar exchange rate and the price of gold. In any case the debate continues; oil price changes certainly cannot be explained solely by looking at the supply and demand dynamics.

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