We present a weekly structural Vector Autoregressive model of the US crude oil market. Exploiting weekly data we can explain short-run crude oil price dynamics, including variations related with the COVID-19 pandemic and with the Russia's invasion of Ukraine. The model is set identified with a Bayesian approach that allows to impose restrictions directly on structural parameters of interest, such as supply and demand elasticizes. Our model incorporates both the futures-spot price spread to capture shocks to the real price of crude oil driven by changes in expectations and US inventories to describe price fluctuations due to unexpected variations of above-ground stocks. Including the futures-spot price spread is key for accounting for feedback effects from the financial to the physical market for crude oil and for identifying a new structural shock that we label expectational shock. This shock plays a crucial role when describing the series of events that have led to the spike in the price of crude oil recorded in the aftermath of Russia's invasion of Ukraine.

Valenti, D., Bastianin, A., Manera, M. (2023). A weekly structural VAR model of the US crude oil market. ENERGY ECONOMICS, 121(May 2023), 1-14 [10.1016/j.eneco.2023.106656].

A weekly structural VAR model of the US crude oil market

Bastianin, A;Manera, M
2023

Abstract

We present a weekly structural Vector Autoregressive model of the US crude oil market. Exploiting weekly data we can explain short-run crude oil price dynamics, including variations related with the COVID-19 pandemic and with the Russia's invasion of Ukraine. The model is set identified with a Bayesian approach that allows to impose restrictions directly on structural parameters of interest, such as supply and demand elasticizes. Our model incorporates both the futures-spot price spread to capture shocks to the real price of crude oil driven by changes in expectations and US inventories to describe price fluctuations due to unexpected variations of above-ground stocks. Including the futures-spot price spread is key for accounting for feedback effects from the financial to the physical market for crude oil and for identifying a new structural shock that we label expectational shock. This shock plays a crucial role when describing the series of events that have led to the spike in the price of crude oil recorded in the aftermath of Russia's invasion of Ukraine.
Articolo in rivista - Articolo scientifico
Bayesian VAR; COVID-19; Futures-spot price spread; Speculation; Structural VAR; WTI price;
English
14-apr-2023
2023
121
May 2023
1
14
106656
reserved
Valenti, D., Bastianin, A., Manera, M. (2023). A weekly structural VAR model of the US crude oil market. ENERGY ECONOMICS, 121(May 2023), 1-14 [10.1016/j.eneco.2023.106656].
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10281/467580
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