Abstract
This study investigates the dynamic integration of the international crude oil market and explores the leading/lagging relationship between the world’s major crude oils—WTI, Brent, Dubai, Tapis and Nigeria—using a time-varying average distance measurement and an error correction model combined with a directed acyclic graph technique. The results indicate a long-term equilibrium relationship between the major crude oil markets from 2000 to 2010, which supports the international crude oil market being integrated. The world’s crude oil market began to diverge at the end of 2010, as demonstrated by the increasing average distance between the prices. WTI has been separated from the international crude oil market system and now reflects more local supply and demand situations. WTI behaved as the price setter before 2010, while Brent has played the leading role in the crude oil market since 2011. Conversely, Tapis always behaves as a price taker, following other crude oil prices.
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