Effects of NYMEX trading on IPE Brent Crude futures markets: a duration analysis

Recent developments in the energy markets, and the surge and dip in crude oil prices over the last few years, have renewed the interest in the workings of the two main price setting markets: London's International Petroleum Exchange (IPE) and New York's Mercantile Exchange (NYMEX). The int...

Full description

Saved in:
Bibliographic Details
Published in:Energy policy 2004, Vol.32 (1), p.77-82
Main Authors: Lin, Sharon Xiaowen, Tamvakis, Michael N.
Format: Article
Language:English
Subjects:
Applied sciences
Crude oil
Crude oil prices
Duration analysis
Economic data
Economic models
Energy
Energy economics
Energy futures
Energy policy
Exact sciences and technology
Fossil fuels and derived products
Futures
Futures trading
General, economic and professional studies
Lead-lag
London
New York
Oil
Policy studies
Pricing
Regression analysis
Stock exchange
Stock prices
Studies
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:Recent developments in the energy markets, and the surge and dip in crude oil prices over the last few years, have renewed the interest in the workings of the two main price setting markets: London's International Petroleum Exchange (IPE) and New York's Mercantile Exchange (NYMEX). The interaction of these two markets, when both of them are open (synchronous trading) and when only London is open (asynchronous trading), is important, in view of the fact that most participants take positions in both markets. This paper looks at how London is affected by New York by analysing the transaction duration of the IPE Brent futures contract, both when the NYMEX WTI futures contract is being traded and when NYMEX is closed. Using tick-by-tick data obtained from IPE, transaction durations are found to form two distinctive and inverted U-shaped patterns. Autoregressive conditional duration (ACD) model, first introduced by Engle and Russell, is applied to the data. Parameters of IPE morning and afternoon are significantly different from each other, underlining the dominant effects of NYMEX on IPE trading. The results from the current analysis reinforce previous results by the authors, which indicate that NYMEX is a leading price setter in crude oil futures prices and has a dominant effect on the IPE-traded contracts.
ISSN:0301-4215
1873-6777
DOI:10.1016/S0301-4215(02)00259-8