The connectedness in the world petroleum futures markets using a Quantile VAR approach

Sangram Keshari Jena, Aviral Kumar Tiwari, Emmanuel Joel Aikins Abakah, Shawkat Hammoudeh

Research output: Contribution to journalReview articlepeer-review

59 Citations (Scopus)

Abstract

This paper investigates how the six major petroleum futures Oman crude, NYMEX RBOB gasoline, ICE low sulphur gasoil, ICE Brent crude, NYMEX light sweet crude and NYMEX NY Harbor ULSD (the new standard for highway diesel)) traded at three global key commodity exchanges are connected, using the novel Quantile VAR spillover approach. The study finds high degree of return connectedness between these markets, which increases as the size of the return shock increases at the 5th and 95th quantiles relative to the median 50th quantile. The global benchmark Brent crude futures traded at the Intercontinental Exchange (ICE) emerges as the lead petroleum futures irrespective of market conditions. NYMEX_RBOB_gasoline_futures emerges as a major receiver of return shocks from other oil futures market. The findings are validated in a time-varying framework, and robustness is also cross validated using the LASSO VAR spillover analysis. Policy implications of the findings are also discussed.

Original languageEnglish
Article number100222
JournalJournal of Commodity Markets
Volume27
DOIs
Publication statusPublished - Sep 2022
Externally publishedYes

Keywords

  • LASSO-VAR model
  • Petroleum futures prices
  • TVP-VAR-Quantile risk spillover model
  • Time-varying
  • Volatility spillovers

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