W o r k i n g P a p e r S e r i e s R e s e a r c h N o t e s 3 2
Prof. Dr. Horst Entorf firstname.lastname@example.orgStefan Schneider email@example.com
Dr. Peter CorneliusAlpInvest PartnersProf. Soumitra DuttaINSEADProf. Michael FrenkelWHU - Otto Beisheim School of ManagementProf. Helmut ReisenOECD Development CentreProf. Norbert Walter Deutsche Bank ResearchDeutsche Bank ResearchFrankfurt am MainGermany
+49 69 910-31877
CFTC reassesses the role of speculators.
Before Gary Gensler became itschairman, the US Commodity Futures Trading Commission (CFTC) held the viewthat speculators had little influence on the price of crude oil, but since then areassessment has been taking place. The crude oil market is particularly suitablefor an analysis of the role of speculative trading due to the enormous importanceof oil to the global economy as a commodity and the high liquidity of its futuresmarket.
The influence of speculation can be substantiated.
This article measuresspeculator activity on the basis of variables contained in the weekly CFTC marketreports and analyses speculator influence on crude oil prices and crude oil pricevolatility using econometric procedures. The results suggest an influence of speculators’ dispersion in beliefs on both crude oil prices and price volatility.Limiting the data basis until 2006 leads to results roughly consistent with thosebased on the current data set. The structural impact of speculators on the crude oilmarket thus does not seem to vary significantly.
Results suggest where regulatory reform should be targeted.
It is notthe activities of speculators themselves, but speculators’ dispersion in beliefs thatdrives crude oil prices – as this paper shows. For this reason the findings of theCFTC also suggest how regulation could be targeted.
Do speculators drivecrude oil prices?
Dispersion in beliefs as a price determinant
December 15, 2009
0501001502002503000255075100125150929496980002040608West Texas Intermediate (right)Noncommercial Long-Positions (left)Noncommercial Short-Positions (left)
Sources: CFTC, DB Research
Noncommercial Positions (weekly)
in 1000, USD