Chinese Fuel Oil Futures Market Price Discovery Function Studies

Since the reform and opening-up, china has experienced high-speed development of economic and social.As a result,the demand for energy is increasing rapidly. Oil is the important energy in our country, the proportion of oil in primary energy production and consumption is rising fast. In the mean time, china has become an oil exporting country instead of the exporter. In the context of the international economic and financial have become integrated deeply, the international petroleum market is getting more and more financialization. As the transformation of international oil market price forming, the situation which oil market was controlled by the OPEC or oil oligarchs has been collapsed. The influence factors of international petroleum is getting more complicated. The key of oil market economic reform is the development of oil futures market.The function of market price mechanism is influenced owing to the absence of developed fuel oil futures, and this restrict the development of oil financial. On August 25,2004, Shanghai fuel oil futures has been launched, and this was a milestone in China's oil financial development. Therefore, the study of price discovery function of the oil futures market -- Shanghai fuel oil futures market- has both theoretical and practical implication.Firstly, we analyze the present situation of fuel oil spot market and futures market. Then, to explore the holding costs theory and storage price theory of price discovery function in the futures market; In next section, the data analysis was carried out for Shanghai fuel oil futures prices, Huang Pu fuel oil spot price, NYMEX (WTI) futures price, respectively. The statistical results of data was compared; Latter, stationarity test, the cointegration test, granger causality test, vector error correction model, impulse response function and variance decomposition method were used to analyze the influence of changing fuel oil spot prices both in domestic and abroad on china fuel oil futures prices, and draw the following conclusions:(1)the price discovery function in china fuel oil futures market is less than abroad, because our fuel oil futures markets are still not mature, there is a lag between the market adjustment process of information feedback and price signal reaction; (2) futures market price discovery function is becoming increasingly obviously, and the supply and demand of spot market has also can be observed in the futures market, but lack of preliminary reflect dynamic adjustment process owing to China fuel oil futures market could not form more real and effective futures prices for the hedging midway still absence (3) the supply and demand in the domestic market is already interacted with international market, but there is obvious time lag, it was caused by the restriction that the acceptance and transmission of information was not unimpeded and fast. Finally, this paper put forward several suggestion on how to further improve spot market access system, perfect the oil futures varieties, establish comprehensive oil futures system,and thus make the fuel oil futures market price discovery function get better performed.