Oil Exchange Rate Research Articles

Connectedness among Chinese climate policy uncertainty, exchange rate, Chinese and international crude oil markets: Insights from time and frequency domain analyses of high order moments

This paper investigates the connectedness among the Chinese climate policy uncertainty, CNYUSD exchange rate, the Chinese crude oil and the international crude oil futures markets in terms of average return, volatility and high order moments. Meanwhile, different timescales and frequencies are also studied using Diebold and Yilmaz (2012) and Baruník and Křehlík (2018) approaches. The empirical results show that the connectedness among climate policy uncertainty, exchange rate and crude oil futures markets are time-varying and can be intensified by extreme events. The strength of connectedness depends on the moment order of spillovers. Covid-19 intensified the return, volatility and kurtosis connectedness. However, the impact of Covid-19 on higher order connectedness is relatively weak. In addition, the return spillovers are mainly caused by the short-term effect while higher order moment spillovers are driven by the long-term effect. Brent oil is the largest net shock transmitter and the Chinese crude oil futures mostly is the largest net shock receiver. Exchange rate is a net receiver except for kurtosis spillovers. The role of Chinese climate policy uncertainty is uncertain. In terms of the net pairwise connectedness, Chinese crude oil futures receives most shocks from Brent oil. In oil-exchange rate nexus, Chinese crude oil futures transmits shocks to the exchange rate in high order moment spillovers. The correlation between climate policy uncertainty and Chinese crude oil futures is time-varying. These findings offer useful implications for investors, policymakers and market supervisors.

Numerical Simulation and Parameter Optimization for Water-to-CO2 Flooding in a Strongly Water-Sensitive Reservoir.

Carbon dioxide flooding can accelerate the development of low-permeability reservoirs of the Kexia group in the K region of the T oil field, thus resolving the issue of inadequate water drive effects. This study was focused on the well group 80513 in the K region, and based on the reservoir and fluid parameters, a simulation model of water-sensitive post-CO2 flooding was constructed to refine the gas injection strategy gradually. The injection rate of the continuous gas injection stage was preferred based on the degree of recovery. Multiindicator and multifactor injection and extraction schemes were established to optimize and analyze the key controlling factors, including the gas injection rate, gas injection period, gas-to-water ratio, and bottom-hole flow pressure, in the carbon dioxide gas-to-water alternation process. Recovery efficiency, oil exchange rate, formation pressure, and carbon dioxide storage rate were used as indicators. After 5 years of continuous CO2 flooding, the results indicated that switching to CO2 gas-water alternating flooding was more appropriate for the target block's environment. The best development plan was achieved when the gas injection rates were 1.0 and 1.25 × 104 m3·d-1 for continuous gas injection and CO2 gas-water alternating flooding, respectively, with a gas-water ratio of 1:1, a gas injection cycle of 90 days, and a bottom-hole flow pressure of 25 MPa in the production wells. A comparison between the results revealed that the formation pressure and oil recovery efficiency of this well group significantly increased upon CO2 flooding, and the parameter optimization results were well suited for controlling the gas flurry, offering a versatile model for future development of the block.

Time-varying connectedness and causality between oil prices and G7 economies exchange rates. Evidence from the COVID-19 and Russia-Ukraine crises

PurposeThis study aims to attempt to investigate the time-varying causality and price spillover effects between crude oil and exchange rate markets in G7 economies during the COVID-19 and Russia–Ukraine crises.Design/methodology/approachThis study uses time-varying Granger causality test and spillover index.FindingsThis study finds a time-varying causality between exchange rate returns and oil prices, implying that crude oil prices have the predictive power of the foreign exchange rate markets in G7 economies in their domain. Furthermore, the total spillover index is estimated to fall significantly around COVID-19 and war events. However, this index is relatively high – more than 57% during the first wave of COVID-19 and decreasing slightly during the Russia–Ukraine conflict.Practical implicationsThis outcome supports the hypothesis that the majority of the time-varying interaction between exchange rates and oil prices takes place in the short term. As a result, the time-varying characteristics provide straightforward insight for investors and policymakers to fully understand the intercorrelation between oil prices and the G7 exchange rate markets.Originality/valueFirst, this study has reexamined the oil–exchange rate nexus to highlight new evidence using novel time-varying Granger causality model recently proposed by Shi et al. (2018) and the spillover index proposed by Diebold and Yilmaz (2012). These approaches allow the author to improve understanding of time-varying causal associations and return transmission between exchange rates and oil prices. Second, compared to past papers, this paper has used data from December 31, 2019, to October 31, 2022, to offer a fresh and accurate structure between the markets, which indicates the unique experience of the COVID-19 outbreak and Russia–Ukraine war episodes. Third, this study analyzes a data set of seven advanced economies (G7) exhibiting significant variations in their economic situations and responding to global stress times.

Oil-exchange rate volatilities and returns nexus

The study evaluates the channel of volatilities and returns between global oil prices and exchange rates of 21 developing countries. The structural vector autoregression (SVAR) findings are that oil-producing and exporting countries would have their exchange rates fluctuate slightly due to changing oil prices. For Markov-regime switching estimations, whereas, exchange rate volatility does not significantly influence volatility in oil prices at both regimes of flexible and fixed exchange rates, there is the presence of significant volatility spill-over from oil prices to exchange rates. Oil price movements do significantly induce appreciation or depreciation of exchange rates. In effect, volatilities in exchange rates do not trigger volatilities in oil prices but positively and considerably influenced crude oil returns in the fixed regime by 0.59%. Notwithstanding the 0.092 low transition probability, all other probabilities that the influence of volatility in the exchange rate on oil market volatility would persist are high for both flexible and fixed regimes of exchange rates. The significant positive coefficients of exchange rates together with high transition probabilities reported are indicative of rising exchange rates, implying devaluation and hence, a negative influence on oil returns and prices. Market agents can therefore diversify risks by investing in oil markets and forex markets independently.

Editorial: Unveiling the intersection of governance and behavior: Insights from varied domains

This issue features a diverse selection of research articles covering a wide range of topics, including supply chain distribution, economic evaluation of costs, challenges faced by informal traders, the effects of macroprudential regulation, sustainability reporting, well-being in the funeral parlor industry, application of green accounting, self esteem, and job satisfaction among academic staff, science under occupation, oil exchange rates and organizational performance, the efficiency of zakat institutions, corporate social responsibility (CSR) adoption, talent management challenges, business risks, the impact of trust, and the impact of resilience.

Oil prices, news-based uncertainty measures and exchange rate returns in BRICS countries

Purpose This paper aims to accommodate the influence of both economic policy uncertainty and geopolitical risks in the relationship between oil price and exchange-rate returns in the Brazil, Russia, India, China and South Africa (BRICS) countries through an interaction term (EPGR). Design/methodology/approach The authors use continuous wavelet transform (CWT), wavelet coherence (WC) and partial wavelet coherence (PWC). First, the authors apply the CWT to examine the evolution of oil prices, EPGR and exchange rate returns. Second, the authors use WC to investigate the relationship between oil price and exchange rate returns (excluding EPGR). Third, the authors use PWC to account for EPGR’s impact on the oil exchange rate returns dynamics and explore partial correlations in the oil and exchange rate returns dynamics. Findings The empirical results generally show that EPGR is a key driver in the oil and exchange rate returns nexus. Practical implications The relevance of EPGR in influencing exchange rate volatility is confirmed by the findings. As a result, it is critical for government officials and foreign exchange investors to use EPGR as a leading indicator when establishing foreign exchange trading strategies and economic forecasts. Originality/value This study is the first, to the best of the authors’ knowledge, to apply a wavelet-based technique to account for EPGR in the relationship between oil and exchange rate returns in the BRICS countries.

The Impact of Oil Price and Oil Volatility Index (OVX) on the Exchange Rate in Sub-Saharan Africa: Evidence from Oil Importing/Exporting Countries

The Theory demonstrates that oil price and oil volatility (OVX) are significant determinants of economic activity; however, studies seldom consider both variables in the oil–exchange rate nexus and ignore the distributional heterogeneity of the exchange rate. We investigate their joint effect and employ both the quantile regression and Markov switching models to address this. We differentiate between positive/negative shocks and control for the effect of the global financial crisis in 2008 and the COVID-19 pandemic in 2020. We observe that OVX shocks significantly impact the exchange rate for all countries whereas, oil price shocks only affect the exchange rate of oil importing countries. Rising (falling) OVX causes the local currency to depreciate (appreciate). The impact of rising or falling OVX is the same for oil importing and oil exporting countries whereas the impact of rising and falling oil price varies. The impact of oil price and OVX on exchange rate is affected by market conditions. The exchange rate responds to oil price and OVX mostly at lower quantiles (bearish markets) for all countries, which reveals investors sensitivity. In contrast, a weak to no significant response is observed at the higher quantiles (bullish market). Our results are robust in model selection (Markov switching models).

Experimental Analysis and Performance Investigation of Immiscible Super-Critical CO2 Flooding Processes in Tight Oil Reservoir

CO2 flooding, a promising technique of enhanced oil recovery, is widely used for its capability of boosting oil recovery, and reducing greenhouse gas emissions. In this study, the oil displacement performance of supercritical CO2 is tested in laboratory under immiscible flooding. The results show that: Supercritical CO2 improves oil recovery, by virtue of its low viscosity, high diffusivity, and easy dissolution. With the same pore volume (PV), supercritical CO2 flooding significantly boosted the oil recovery factor. The factor reached the maximum, when almost 1.5PV of CO2 was injected. As CO2 moved from the gas phase to the supercritical state, the oil displacement efficiency increased by 10%. To obtain the same oil recovery factor, non-supercritical flooding needed to inject more CO2 than supercritical flooding. Light hydrocarbon components (C1-7) in crude oil were gradually extracted before CO2 breakthrough, while heavy hydrocarbon components (C7+) were extracted mainly after CO2 breakthrough. In addition, supercritical CO2 flooding extracted more intermediate hydrocarbons than critical CO2 flooding. To sum up, supercritical flooding outperforms non-supercritical flooding in injection performance, oil displacement efficiency, and oil exchange rate.

Three-Dimensional Physical Simulation of Heavy Oil Exploitation by Hot Solvent Injection

To improve the thermal effects of solvents on heavy oil reservoirs and realize the combined action of multiple flooding mechanisms, such as solvent heating and extraction, without steam mixing, based on the M Block heavy oil reservoir in Canada, three sets of comparative hot solvent-assisted gravity drainage experiments under different temperatures and pressures were carried out through an indoor three-dimensional (3D) physical simulation device. The development characteristics of the solvent chamber in the hot solvent-assisted gravity drainage technology were studied under different pressures and temperatures, and the recovery factor, cumulative oil exchange rate, and solvent retention rate were analyzed. The results showed that due to the effect of gravity differentiation, the development morphology of the solvent chamber could be divided into three stages: rapid ascent, lateral expansion, and slow descent. When the temperature was constant, the reservoir pressure decreased, the recovery rate increased, the cumulative oil exchange rate increased, and the solvent retention rate decreased; when the pressure was constant, the temperature increased, the viscosity of heavy oil decreased, the recovery rate increased, the cumulative oil exchange rate increased, and the solvent retention rate was low. Additionally, the study also showed that for hot solvents in different phases, the use of hot solvent vapor not only required less injected solvent but also exhibited a high oil production rate, which shortened production time and reduced energy consumption. Moreover, the oil recovery rate was higher than 60%, the solvent retention rate was lower than 10%, and the cumulative oil exchange rate was higher than 3 t / t , which constituted better economic benefits and provided a reliable theoretical basis for onsite oilfield applications.

A pressure drop model of post-fracturing shut-in considering the effect of fracturing-fluid imbibition and oil replacement

Since the production regime of shut-in after fracturing is generally adopted for wells in shale oil reservoir, a shut-in pressure drop model coupling wellbore-fracture network-reservoir oil-water two-phase flow has been proposed. The model takes into account the effects of wellbore afterflow, fracture network channeling, and matrix imbibition and oil exchange after stop of pumping. The simulated log-log curve of pressure-drop derivative by the model presents W-shape, reflecting the oil-water displacement law between wellbore, fracture network and matrix, and is divided into eight main control flow stages according to the soaking time. In the initial stage of pressure drop, the afterflow dominates; in the early stage, the pressure drop is controlled by the cross-flow and leakoff of the fracture system, and the fractures close gradually; in the middle stage of pressure drop, matrix imbibition and oil exchange take dominance, and the fracturing fluid loss basically balances with oil replaced from matrix; the late stage of pressure drop is the reservoir boundary control stage, and the leakoff rate of fracturing-fluid and oil exchange rate decrease synchronously till zero. Finally, the fracture network parameters such as half-length of main fracture, main fracture conductivity and secondary fracture density were inversed by fitting the pressure drop data of five wells in Jimsar shale oil reservoir, and the water imbibition volume of matrix and the oil replacement volume in fracture were calculated by this model. The study results provide a theoretical basis for comprehensively evaluating the fracturing effect of shale oil horizontal wells and understanding the oil-water exchange law of shale reservoir after fracturing.

Experimental investigation of innovative superheated vapor extraction technique in heavy oil reservoirs: A two-dimensional visual analysis

Steam-assisted gravity drainage (SAGD) has been widely employed for heavy oil exploration, which however suffers low oil displacement efficiency and high-water consumption. Conventional vapor extraction (VAPEX) remediates those issues, nevertheless, accompanied by low oil production rate with cold or warm solvents injection. Here, an innovative thermal VAPEX was investigated for when injecting superheated solvents (>160OC). The thermal properties of several solvents were compared to indicate the impacts of temperature and solvent concentration. Three sets of two-dimensional visualization experiments were conducted to elucidate the changes of temperature field and solvent chamber, characterized by oil recovery, cumulative oil exchange rate and solvent retention. The results showed that a hot solvent with a higher carbon number resulted in a larger latent heat of vaporization and a better viscosity reduction effect by dissolution and heating. The viscosity reduction rate of n-pentane (below 10 wt%) was approximately 70%. Solvent chamber developed step-wisely: rising stage, lateral expansion stage and descending stage. Over liquid solvent, solvent vapor rendered greater sweep efficiency (75%), displacement efficiency (85%), much lower solvent retention (10%), high oil recovery (65%), and cumulative oil exchange rate (8 t/t). Current studies provided a reliable experimental basis to further exploit thermal vapor on site.

Synergistic Modes and Enhanced Oil Recovery Mechanism of CO2 Synergistic Huff and Puff

With the gradual declining of oil increment performance of CO2 huff-and-puff wells, the overall oil exchange rate shows a downward tendency. In this regard, CO2 synergistic huff-and-puff technologies have been proposed to maintain the excellent effect and extend the technical life of such wells. However, there is no specific research on the mechanism and synergistic mode of CO2 huff and puff in horizontal wells. This study aims to establish the synergistic mode and determine the adaptability and acting mechanism of CO2 synergistic huff and puff. Three synergistic huff-and-puff modes are proposed based on the peculiarity of the fault-block reservoir’s small oil-bearing area and broken geological structure. We establish three typical CO2 synergistic huff-and-puff models and analyze the influence of different geological and development factors on the huff-and-puff performance with numerical simulation. Each factor’s sensitivity is clarified, and the enhanced oil recovery (EOR) mechanism of CO2 synergistic huff and puff is proposed. The sensitivity evaluation results show that the reservoir rhythm, inter-well passage, well spacing, high-position well liquid production rate, and middle-well liquid production rate are extremely sensitive factors; the stratum dip and injection volume allocation scheme are sensitive factors; and the relationship with structural isobaths is insensitive. The EOR mechanism of synergistic huff and puff includes gravity differentiation, supplementary formation energy, CO2 forming foam flooding, and coupling effect of production rate and oil reservoirs. The implementation conditions of the two-well cooperative stimulation mode are the simplest. The two-well model is suitable for thick oil layers with a positive rhythm and large formation dip. The single-well mode requires no channeling between the wells, and the multi-well mode requires multi-well rows and can control the intermediate well’s fluid production rate. Field application at C2X1 block shows a good performance with a total oil increment of 1280 t and an average water-cut reduction of 57.7%.

Kinetic Analysis of Ultrasound-Induced Oil Exchange in Oil-in-Water Emulsions through Contrast Variation Time-Resolved Small-Angle Neutron Scattering.

Ultrasound is one of the most commonly used methods for synthesizing and processing emulsion systems. In this study, the kinetics of acoustically induced emulsion oil exchange was examined using contrast variation time-resolved small-angle neutron scattering (CV-SANS). A custom-built sample environment was used to deliver acoustic forces while simultaneously performing CV-SANS experiments. It was observed that the oil exchange rate was significantly accelerated when sonicating at high acoustic pressures, where violent cavitation events can induce droplet coalescence and breakup. No significant oil exchange occurred at acoustic pressures below the cavitation threshold within the short time scales of the experiments. It was also observed that the oil exchange kinetics was deterred when emulsions were stabilized by surfactants. In addition, oil exchange rates varied nonlinearly with the concentration of surfactant, and exchange was slowest when the emulsions were stabilized by an intermediate concentration. It is hypothesized that emulsion size, electrostatic repulsion, and Gibbs elasticity of the oil-water interface play significant roles in the observed trends. The observed trends in oil exchange rates versus surfactant concentration coincide well with theoretical models for the fluctuation of the elasticity of the interface. Acoustically induced oil exchange was most inefficient when the interfacial elasticity was at its maximum value.

Contrast-Variation Time-Resolved Small-Angle Neutron Scattering Analysis of Oil-Exchange Kinetics Between Oil-in-Water Emulsions Stabilized by Anionic Surfactants.

Contrast-variation time-resolved small-angle neutron scattering (CV-SANS) was used to examine oil-exchange kinetics between identical mixtures of hydrogenated/deuterated hexadecane emulsion systems. Oil-exchange rates were estimated by transforming recorded scattering profiles to a relaxation function and by fitting to exponential decay models. We find that the oil-exchange process was accelerated when the droplets were stabilized by anionic surfactants even at concentrations well below the surfactant critical micelle concentration. Moreover, the exchange rate was not significantly accelerated when surfactant micelles were present. This suggests that micellar-mediated transport mechanisms do not play the dominant role in these systems. Screening electrostatic repulsion by increasing the ionic strength of the medium also had a negligible effect on oil-exchange kinetics. In contrast, the use of oils with shorter alkane chain lengths (e.g., dodecane), having a higher solubility in water, significantly accelerated rates of oil transport between droplets. Oil-transport rates for hexadecane were also found to increase with temperature and to follow Arrhenius behavior. These results were rationalized as an increase in the droplet-collision frequency due to Brownian motion that results in direct oil transport without irreversible coalescence. Thus, primary mechanisms for oil exchange in insoluble anionic surfactant-stabilized emulsion systems are hypothesized to be through direct emulsion contact, reversible coalescence, and/or direct oil permeation through thin liquid films. CV-SANS is also demonstrated as a powerful technique for the study of transport kinetics in all kinds of emulsion systems.

Energy contagion analysis: A new perspective with application to a small petroleum economy

We put forward the novel concept of energy contagion, i.e. a deepening of energy-finance linkages under crisis conditions in energy markets. Further, we show how to construct tests for energy contagion through correlation, co-skewness, and co-volatility channels. The samples of our contagion measures are defined in terms of calm and crisis periods in the international crude oil market. In particular, we compare how these various co-moments in the energy-finance nexus change during: (1) Oil booms and slumps using semi-parametric rule-based algorithms; (2) Tranquil and turbulent oil price volatility episodes using a non-hierarchical k-means clustering algorithm. Energy contagion analysis is essential for financial stability analysis in economies where prosperity is linked to the prices of hard commodities. Our applications are performed on the oil-exchange rate and oil-stock market relationships of the small petroleum economy of Trinidad and Tobago. The main results show a negative oil-real effective exchange rate dependency; a weak oil-stock returns association; and the existence of several energy contagion channels in both financial relationships, which are sensitive to the contemporary global financial crash.

Exchange rate fluctuations, oil price shocks and economic growth in a small net-importing economy

Policy makers often rely on theoretical wisdom and tend to allocate huge resources towards hedging strategies against oil price and exchange rate movements without considering to first test these theories on a context basis. To overcome this limitation, we model both upward and downward movements in oil prices and exchange rates in order to study the oil – exchange rate – growth nexus for a small net-importing country like Liberia. We estimate an unrestricted VAR model and document the following results: First, a rise in the price of oil appears to stimulate Liberian GDP. Second, depreciation in the value of the Liberian dollar causes real GDP to fall while appreciation of the Liberian dollar tends to have no impact on real GDP in Liberia. Third, trade balance has a positive correlation with growth of the Liberian economy. Finally, consumer prices are found to also correlate positively with economic growth in Liberia. Contrary to bulk of the literature, this paper provides general insights that a rise in oil price is sometimes good for net-oil importers.

Dependence Structure between Oil Prices, Exchange Rates, and Interest Rates

This article unveils the dependence structure between crude oil prices, exchange rates, and the United States interest rates. We begin by using asymmetric GARCH models to examine the marginal behavior of the returns, and then various copulas are used to understand extreme market co-movements. We also investigate the causal relationship and the spillover effects by using the Granger causality test and the BEKK representation of a multivariate GARCH process. Over the 1998-2017 period, we find evidence of an inverse relationship between the U.S. interest rates and the crude oil prices. Oil-exchange rate linkages become stronger for most of the oil dependent countries considered in this article in the aftermath of the global financial crisis. There is also asymmetric tail dependence for almost all of the oil-exchange rate pairs. The results of Granger causality tests mainly indicate that crude oil prices Granger cause exchange rates. We also find that there are unidirectional volatility spillovers from WTI to exchange rates for oil exporting countries and to the U.S. interest rates. These findings provide important implications for investors to hedge the possible risk with international portfolio diversification.

What determines the long-term correlation between oil prices and exchange rates?

In this study, we obtain the long-term correlation between oil prices and exchange rates by employing the dynamic conditional correlation-mixed data sampling (DCC-MIDAS) model. We then identify the factors that influence the long-term correlation using panel data analysis. We find that the long-run correlations between oil prices and exchange rates are negative for all oil-exchange rate markets except Japan. We also find that both inflation and term spread have negative effects, while the risk-free interest rate has a positive effect on the long-term correlation between oil prices and exchange rates. Importantly, the empirical results show that an increase in inflation will significantly damage the real value of the currency itself.

Improving the Forecast Accuracy of Oil-Exchange Rate Nexus in GCC Countries

This paper renders new evidence on the predictability of GCC dollar exchange rates using crude oil prices relying on the approach of Westerlund [1] [2] that accounts for salient features of the predictor. The results show the presence of significant in-sample predictability of exchange rates using crude oil prices (Brent and WTI prices) across the GCC countries. The results of forecast evaluation based on the root mean square error (RMSE), Campbell-Thompson (C-T) statistic and Diebold-Mariano (D-M) statistic are rather mixed. The superior forecast performance of the oil-based exchange rate model is highly sensitive to the choice of benchmark time-series models. We, however, conclude the overwhelming forecast performance of time-series models (namely, AR, ARMA, and ARFIMA) over our oil-based exchange rate model in predicting exchange rates across the GCC region.

Energy Contagion Analysis: A New Perspective with Application to a Small Petroleum Economy

We put forward the novel concept of energy contagion, i.e. a deepening of energy-finance linkages under crisis periods in energy markets, and test for this using standard correlation measures and recently proposed adjusted correlation, co-skewness, and co-volatility contagion tests. Our analysis is applied to the oil-exchange rate and oil-stock market relationships of the small petroleum economy of Trinidad and Tobago. By defining our samples for the contagion measures in terms of calm and crisis conditions in the international crude oil market, we are able to compare how various co-moments in the energy-finance nexus change during oil booms and slumps using semi-parametric rule-based algorithms, as well as during relatively tranquil and turbulent oil price volatility episodes with a non-hierarchical k-means clustering algorithm on volatility measures. Our main results show a negative oil-real effective exchange rate dependency; a weak oil-stock returns association; and the existence of several energy contagion channels in both financial relationships, which vanish when we control for the contemporary global financial crash. Energy contagion analysis is essential to financial stability analysis in economies where prosperity is linked to the prices of hard commodities.