Study Of The Relationship Between Oil Futures Prices And Spot Prices

This paper is studying fluctuation of price, backwardation and contango in future markets. Based on the theory of future market and spot market, it takes a further analysis of Robert and Nir's study of backwardation in oil future markets. By data acquisition and processing, descriptive statistics and time series analysis, it investigates the relationship between backwardation and the equilibrium of oil future prices and spot prices. Fisrstly, it generalizes the circumstance of international historical oil prices, and tries to find the causes of oil price fluctuation. Secondly, this paper makes a further study on the theory of Robert and Nir. In this part, it computes the data of years following 1993 by N-R model. After that it compares the results with the former results. Thirdly, the paper applys time series analysis to establish a VAR model. The model contains two parts. One part takes the sample ranging from January 1993 to March 2006, and the other part takes the sample ranging from January 2003 to March 2006. The latter part refers to a special period in which oil prices rise quickly. At last, on the basis of traditional theory, the paper obtains the conclusion on price fluctuation, backwardation and contango on future markets. Through the analysis it concludes that the future market is effective.It also shows that the cause of backwardation is that a steady relation exists between spot price and future price, and divergence of this stable relationship generates contango in short-term.