Study On Crude Oil Futures And Spot Price Linkage And Its Volatility Spillover Effect

The global crude oil market has long been benchmarked against Brent and WTI prices,however,the launch of the Shanghai International Energy Center’s oil futures contract with the RMB as the denomination currency on March 26,2018 reopened the debate about the relationship between Brent and WTI and their role in the oil price discovery process.China’s low level of oil production and growing energy demand,with China ranking first in the world in oil imports and second in consumption,is one of the reasons behind Shanghai crude oil futures becoming the third most traded crude oil futures contract in the world within three months of its launch.With China’s economic development and industrial changes,the country’s demand for crude oil continues to increase,but due to the lack of domestic crude oil production but huge consumption,China’s external dependence on crude oil is extremely high but it has not yet been able to grasp the pricing power of crude oil,so the study on the price discovery function of Shanghai crude oil futures has received wide attention.Based on the above background,this paper examines the price linkages between the three most important international crude oil futures and the spot market,and forecasts the crude oil spot price.First,the background and significance of the study are introduced;second,relevant domestic and international studies are sorted out;then,the theories related to the global major futures markets and crude oil futures and spot price linkages are introduced;then,empirical research methods are applied to analyze the linkages between different markets at two levels: mean spillover effect and volatility spillover effect.This paper selects Shanghai crude oil futures(SC)and Daqing crude oil spot,New York WTI crude oil futures and spot and London Brent crude oil futures and spot in the period from March 26,2018 to November 29,2021 after the listing of Shanghai crude oil futures as the research objects,and uses VAR models through impulse response,variance decomposition,and linear and nonlinear Granger causality tests The VEC model is used to analyze the mean spillover effect,the ARIMA model is used to forecast the three crude oil spot prices,and the BEKK-GARCH model is used to analyze the volatility spillover effect between the futures and spot marketsThe results show that: 1.the price linkage between Brent and WTI crude oil futures and their corresponding spot has been very mature,while the linkage between Shanghai crude oil futures and spot is lower than the other two crude oil futures,but has initial pricing efficiency for the spot market.2.the price movement of Shanghai crude oil futures follows the international futures market,and the pricing efficiency is not as good as Brent and WTI futures markets,and Shanghai crude oil futures have not changed the dominant position of Brent and WTI in the world oil market,especially the Brent futures market is still the most important market in the world oil futures price discovery process.3.VEC model can be used to forecast spot prices using future prices,and the forecast results are good.Therefore,based on the comparative analysis of the linkage of domestic and foreign crude oil futures and spot markets,and also drawing on the development experience of Brent and WTI crude oil futures,this paper proposes the following recommendations: 1.improve the composition of delivery oil species and insist on the diversification of traded oil species.2.build a diversified crude oil derivatives system and enhance the convenience of investors.3.improve the risk regulation system and promote the reform of the energy financial market.