International Crude Oil Research Articles

PUSH AND PULL FACTORS DETERMINANTS OF FOREIGN DIRECT INVESTMENT TO NIGERIA: AN AUTOREGRESSIVE DISTRIBUTED LAG (ARDL) APPROACH

Purpose: Foreign direct investment is sensitive to domestic and external factors. The sensitivity to external factors means changes in global productivity levels (financial sentiments) may produce a substantial impact on FDI in Nigeria. The study is aimed at examining the pull and push factor determinants of foreign direct investment to Nigeria.
 Methods: The study adopted the Autoregressive Distributed Lag (ARDL) Approach to achieve the long and short-run determinants. The study uses secondary data sets from 1986 to 2018 with the application of Eviews 9 output to analyse data.
 Results: Findings from the ARDL model shows that foreign direct investment is sensitive to domestic (depreciation of exchange rate and interest rate) and external factors (US gross domestic product and US interest rate) both in the long and short run. The study concludes that foreign direct investment into Nigeria is due to ‘pull’ factors rather than ‘push’ factors.
 Implications: The implication of the study showed that foreign direct investment flow surges cannot be denied in determining the macroeconomic performance in Nigeria. The choice of FDI seems to future more in Nigeria’s economy. Understanding of the factors that drives FDI can inform efforts by government and expert on how to attract and manage FDI to the Nigerian economy.
 Conclusion: The study concluded that the flutuation in FDI is determined by both domestic and global factors. These factors had differential impact on FDI volatility. Consequently, the study recommended the need for the prudent management of these determinants to ensure reduced volatilities which are essential for the growth of the domestic economic particularly at this time when the Nigerian economy is in great need of foreign investment owing to the continuous fall in international crude oil price and the recession facing the economic.

Evolution of the information transmission between Chinese and international oil markets: A quantile-based framework

This paper investigates the evolution of the information transmission between Chinese and international crude oil markets from the perspective of return and volatility spillovers through a quantile-based framework. Using a causality-in-quantiles test, we find the asymmetric and nonlinear transmission featured by uni-directional spillovers from international WTI to China’s Shanghai oil markets in different conditions of the two markets, but not the other way around. Moreover, the degree of the information transmission is estimated using a Quantile-on-Quantile approach. Through this, marginal impacts of return and volatility of the WTI oil benchmark on that of the Shanghai oil market in a full-distributional environment are respectively gauged. We find that both return and volatility spillovers demonstrate an overall positive and heightening intensity with increases in the corresponding quantiles of the Shanghai oil market. The spillovers would be weakened by extreme events in the China domestic market, suggesting an important role of internal innovations in governing the Chinese and international oil market relationship. Overall, our results do not support the ‘one great pool’ hypothesis in the global oil market, and possess important implications. A battery of robustness checks reassures our findings.

Analyzing the risk spillovers of international crude oil on China's corn and biofuel ethanol markets: A transition toward green economy and environmental sustainability

This study aims to analyze the risk spillover effects between the global crude oil market and the biofuel ethanol and corn markets in China, employing a DCC-GARCH-Copula-CoVaR model and basing the weekly price data from 2012 to 2021. The empirical results revealed that there were dynamic conditional correlations among international crude oil, China's biofuel ethanol, and corn markets. Following the COVID-19 outbreak, the CoVaR and ΔCoVaR changed, which caused a sharp increase in the mean values and volatility. Additionally, China's biofuel ethanol market is more vulnerable to the risk spillovers from the international crude oil market than China's corn market. However, China's markets do not appear to have obvious risk spillover effects on the global market. The implications of the results are discussed in financial market supervision, including the risk management and portfolio adjustment.

The Dynamics of the Chinese and Global Crude Oil Market Integration: Evidence From a DCC-MIDAS Model

This paper studies the correlation between Chinese crude oil futures and international benchmarks using DCC-MIDAS models. We find that the correlation between the Chinese and international crude oil markets heightened during the COVID-19 outbreak and peaked in June 2020. As the intensity of the pandemic in China weakened, the oil market correlation weakened as well. However, as international oil prices increased from October 2021 afterwards, the oil market correlation heightened.

Influence of RMB Internationalization on International Crude Oil Price Fluctuation

In recent years, China has been gradually improving its international status. As far as monetary policy is concerned, China has been gradually promoting the internationalization of the RMB, aiming to reduce its dependence on the international financial market dominated by the US dollar and reduce the impact of the Federal Reserve's political measures on the domestic economy. Under the influence of global economic and financial market factors such as COVID-19, the international financial system dominated by the US dollar is unstable and dangerous, and the international financial system has become more volatile. In contrast, the implementation of this measure will have an impact on some international financial transactions, such as stock market price fluctuations, commodity prices and foreign exchange transactions. For a long time, the oil price has been dominated by the US dollar due to the linkage between the US dollar and oil, and has increased with the appreciation of the US dollar. However, the process of people's internationalization affected the oil price by changing this traditional logic and impacted the global status of the US dollar, thus reducing the oil price by triggering the decline of the US dollar. This paper would like to focus on elaborating the influence of RMB internationalization on international crude oil price fluctuation.

Does COVID-19 pandemic event alter the dependence structure breaks between crude oil and stock markets in Europe and America

This article attempts to investigate the influence of novel coronavirus (COVID-19) pandemic on the dependence structure break between crude oil and stock markets in Europe and America using ARMA-GARCH and R-vine copula methods. The empirical results demonstrate that international crude oil and European (American) stock markets have significant asymmetric and symmetric dependence structure, rapid outbreak of COVID-19 pandemic triggers their dependence structure break. The results of Kendall correlation confirms that COVID-19 pandemic amplifies the dependence risks between European Brent crude oil and France (German and Spain) stock markets and reduces the dependence risk between Brent crude oil and UK (Italy) stock markets after February 20, 2020. The COVID-19 pandemic may amplify the dependence risk between West Texas Intermediate (WTI) crude oil and Canada stock markets after March 23, 2020, it first quickly reduces the dependence risks between WTI crude oil and US (Brazil and Mexico) stock markets after March 23, 2020 and then enlarges their dependence risks after June 30, 2020. European and American crude oil and stock markets have induced different ranges of their dependence risks in different time scales and their dependence structure breaks have good robustness.

International Crude Oil and Refined Products Trade, Year 2021

International Crude Oil and Refined Products Trade, Year 2021

International Crude Oil and Refined Products Trade, Year 2020

International Crude Oil and Refined Products Trade, Year 2020

International Crude Oil Trade, Year 2020

International Crude Oil Trade, Year 2020

Dependence and spillover among oil market, China's stock market and exchange rate: new evidence from the Vine-Copula-CoVaR and VAR-BEKK-GARCH frameworks

We first employ the method of multivariate GARCH models and Vine-Copula-CoVaR to analyse relationships between dependence, systematic risk spillover, and volatility spillover between the USD/CNY exchange rate and the returns on WTI crude oil futures and the Chinese stock market since China's 2005 foreign exchange reform. We utilise daily data from 2005 to 2020. We find a more complex dependence of the USD/CNY exchange rate on stock markets and WTI crude oil prices. All have negative risk spillovers among paired markets, with WTI having the most substantial risk spillover. However, the strength of the systematic risk spillover varies across markets. Based on the results of the VAR(1)-BEKK-GARCH (1,1) and Wald tests confirm that there is a substantial mean spillover from the Chinese stock market and the USD/CNY exchange rate to the WTI crude oil price, whereas there is a more significant spillover from the WTI crude oil price to Chinese stock market volatility. The empirical findings extend the systematic understanding of the international crude oil price shocks to the dependence and transmission mechanism between the Chinese stock market and the USD/CNY exchange rate (USD/CNY). Our findings can help investors and policymakers to manage risk better and develop more sensible market rules.

The effect of US economic policy uncertainty on market risk of international crude oil and the portfolio strategy

The paper investigates the impact of US economic policy uncertainty (EPU) on major crude oil markets. GARCH-tDDC-Copula model is constructed to study the spillover effect of US EPU on the international crude oil market risk, and then the median-CoVaR portfolio model is constructed to discuss the optimal portfolio strategy of crude oil importers when US EPU is in different states. Results show that the spillover effect of US EPU on international crude oil market risk is nonlinear, asymmetric and time-varying. When US EPU increases from the average level to the 0.95 quantile level, the price reduction risk of crude oil market in Brent, Dubai and Western Texas increases by 37.26%, 42.66%, and 39.28% respectively, and the price increase risk increases by 7.22%, 6.64%, and 7.53% respectively. Compared with the median-VaR portfolio strategy and the equal-weight combination portfolio strategy, the advantage of the median-CoVaR model is that it can achieve ‘targeted’ management for asset risk under specific conditions. When US EPU peak occurs, crude oil importers can formulate a basket price strategies with dynamic weighted based on the median-CoVaR model, which can better reduce the depreciation risk of crude oil assets. The findings have important implications for importers and investors.

The Russian-Ukraine Conflict, Crude Oil Price Fluctuation and Dynamic Changes in Stock Market: Evidence from the U.S and China

Political struggle is an important factor affecting the pattern of the international oil trade. The escalation of collisions between Russia and Ukraine, and the economic sanctions that the United States and European countries implemented against Russia had a significant impact on Russian oil exports. In this context, it is crucial to study how Chinese and American stock markets react to the burnt of international crude oil prices, in order to understand the phenomenon of risk contagion between markets and prevent risks. This paper selects the settlement prices of the Dow Jones index, S&P 500 index, Nasdaq index, Shanghai index, Shenzhen index, and international crude oil futures prices from three months before the Russian-Ukraine Conflict to the end of May 2022 to illustrate the tolerance to the volatility of two markets, using VAR and ARMA-GARCH model. The empirical results indicated that crude oil price fluctuation has a stronger impact on the US stock market than on the Chinese stock market, and specific stocks act differently during this “black swan incident”.

The Russia-Ukraine Conflict, Crude Oil Price, and Transportation Industry Yield

The Russia-Ukraine Conflict had a serious impact on the economy of Russia and Ukraine and even the world, among which oil, banking, entertainment, and other industries were hit hard. Through the fluctuation of the transportation industry index during the Russia-Ukraine Conflict, this paper concluded that the Russia-Ukraine Conflict had a negative impact on the transportation industry in the short term. But in the longer term, the transport index soon leveled off. This paper finds that the global crude oil price index has a significant impact on the transportation industry only in the short term, and the fluctuation is particularly severe in the early stage of the outbreak of Conflict. This paper uses time-series model, VAR and ARMA-GARCH, to capture the impact of this external shock on the yield and volatility of transportation industry. Based on VAR estimation results, this paper finds that the VAR system we use is stationary processes. Further research finds that, through ARMA-GARCH model estimation, the change of international crude oil price will lead to the fluctuation of production of transportation industry. But this effect is delayed, which also reflects the time lag of financial market transmission. In this paper, we find that global crude oil prices have a significant impact on the inventory returns of the transportation industry in the short run. At the beginning of the conflict, returns were volatile, with the magnitude of the oscillations decreasing over time, and while the returns of the transport index were negatively affected by fluctuations in oil prices in the short term, the conflict had little impact on stock returns in the long term.

The Impact of Crude Oil Price Shocks on Bitcoin under the Russian–Ukrainian War

Nowadays, the Russian-Ukrainian war has been a hotly topic, and the war has shaken the global economy, especially in the international crude oil market. Also, as a popular financial instrument, the investors like to see Bitcoin as a hedging tool, but the problem of whether cryptocurrencies can hedge the volatility of commodity markets lacks a unified explanation. Therefore, the paper wants to find the relationship between Bitcoin and crude oil during the Russian-Ukrainian war. This paper uses data from Bitcoin, crude oil WTI futures, and crude oil Brent futures, and constructs the VAR model and ARMA-GARCH model based on these data. Ultimately, the article finds that the volatility of the international crude oil market only has little impact on Bitcoin. Thus, the investors do not need to worry about the high crude oil price caused by the war will affect Bitcoin’s yield and volatility, so Bitcoin seems like a great hedging instrument against the shock of the international crude oil market.

Analysis of the hedging strategy for the huge loss of Sinopec Group

The use of crude oil futures for hedging is common for companies that use crude oil as a raw material. It helps companies to hedge against the risks associated with the volatility of crude oil prices and avoid major problems such as cash flow shortages. However, if hedging is abused, it can also have a significant impact on a company's profits. In late 2018, one of Sinopec Group's subsidiaries, United Petrochemical, mistakenly used financial derivatives to hedge, resulting in a plunge in net profit and share price for the entire group. This article analyses Sinopec Group's financial position for the three years 2017, 2018, and 2019, examines United Petrochemical's hedging strategy, and ultimately points out the reasons for and implications of its failure, with a view to providing lessons for the subsequent use of financial derivatives for hedging in related industries. The authors found that a subsidiary of Sinopec Group incurred large losses when international crude oil prices fell as it bought too many futures, causing Sinopec Group's profits to fall by more than 90% in the fourth quarter of 2018 and evaporating more than RMB 90 billion in market value in the two days the deal came to light.

The impact of institutional analyst forecast divergence on crude oil market: Evidence from the mixed frequency models

As important information intermediaries, analysts play a non-negligible role in the crude oil market. Existing research often focuses on analysts' collection and interpretation of firm-specific information, but neglects the impact of analysts' forecasts on specific markets such as the crude oil market, which is crucial to the safe and stable development of the crude oil market. Therefore, this study uses historical data from January 2011 to December 2020 as a sample to construct analysts' forecast divergence indicators from 15 institutional analysts' forecast data on international crude oil futures prices. It then explores the impact of institutional analysts' forecast divergence on oil price return volatility, crude oil market jumps and crude oil futures trading volume, based on various mixed-frequency models. The results are as follows: First, volatility in oil price returns increases with a growing divergence in analysts' forecasts. Second, analysts' forecasts do not trigger jump in the crude oil market on the first six days after the information is released, but trigger a significant positive jump in the market on the seventh day. Third, the impact of analysts' forecast divergence on trading volume is weak; however, the reverse effect is significant, while the static and dynamic spillover results are consistent.

Nonlinear Spillover and Dynamic Connectedness Between International Crude Oil and Dow Jones Islamic Market

This study examines crude oil prices throughout the world, as well as significant stock returns of European oil importers and exporters (the UK, Germany, France, Italy, Switzerland, and the Netherlands) (Norway and Russia). Indexes of sustainability stocks have a greater correlation with countries that import oil than with those that export oil. There was a stronger correlation between oil prices and stock prices both during and after the global financial meltdown in 2008. Study findings reveal a strong correlation between worldwide crude oil prices and major indices of countries that purchase or export oil. Our results have the potential to assist socially aware investors in hedging and diversifying their portfolios.

Dynamic risk resonance between crude oil and stock market by econophysics and machine learning

Changes in crude oil prices have a strong impact on global stock markets. As the largest importer of crude oil, China’s international crude oil market and stock market have a strong risk of contagion. It is of great significance to study the stochastic resonance effect between crude oil market and Chinese stock market. This paper proposes the dynamic risk resonance analysis method based on econophysics and machine learning. From the perspective of stochastic resonance in nonequilibrium statistical physics, we set up a new periodic capital asset pricing model based on econophysics and asset pricing theory, and introduce signal power amplification to describe the risk resonance effect of crude oil price and Chinese stock market. Then, we analyze the dynamic risk resonance between crude oil and stock market impacted by systemic risk and investor heterogeneity. The results demonstrate that: (1) Based on machine learning and predictive testing, the in-sample and out-of-sample forecasting results show that the proposed new periodic model has better fitting performance than the benchmark model; (2) There are optimal system parameters and period information to minimize the risk resonance effect between two markets; (3) The existence of optimal investor heterogeneity leads to inverse resonance behavior between the two markets, which greatly reduces the contagion of market risks.

Impact of oil price and oil production on inflation in the CEMAC

There are different channels through which variations in international crude oil prices translate into changes in net-oil exporting countries' domestic prices. This article identifies two of these causal mechanisms, namely the pass-through effect and the Dutch disease effect. It intends to disentangle these two effects in the five oil producers of the Central African Economic and Monetary Community: Cameroon, the Republic of Congo, Chad, Equatorial Guinea, and Gabon. It also investigates the heterogeneity across countries in the face of international oil price and domestic oil production shocks based on a multiple time-series strategy covering the period 1995–2019. Applying Dynamic Ordinary Least Squares and Autoregressive Distributed Lag models, it concludes to the presence of a pass-through effect in Cameroon, Chad, and the Republic of Congo and of a Dutch disease effect in Equatorial Guinea. This contributes to the understanding of the relationships between international commodity prices and domestic consumer price variations but can also help policymakers in the CEMAC by assessing the vulnerability of its members toward external shocks.

The Impact of 2022 Russia-Ukraine Conflict on the Financial Market: Evidence from China

This paper concerns the effect of the 2022 Russia-Ukraine conflict on the Chinese stock market. The event has caused chain reactions on a global scale, among which the soaring energy prices caught the most attention for having the most significant influence. Using the international crude oil futures’ settlement prices and two market indexes as indicators of energy prices and Chinese stock market performance, this paper mainly focuses on their changes before and after Russia-Ukraine War. The data covers the period from 25 November 2021 to 14 April 2022, and time series analysis methods, including the Vector autoregression (VAR) model and ARMA-GARCH model, are used in the analysis process. Also, this paper conducts impulse response to examine the impact of one unit oil price change on the Chinese stock market index over time. As a result, a significant correlation between the upsurge in the energy prices and the downtrend of Chinese stock market performance can be found after the breakout of the Russia-Ukraine conflict, suggesting that international incidents can cause global turmoil. Nevertheless, for a mature market with good resilience, the influence of the strike would gradually evaded.