Effects of futures market manipulation on crude oil prices: An empirical examination

Date

2011-05

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Abstract

Crude oil prices moved irregularly in the period leading to the financial meltdown in the beginning of 2008. This research paper deals with the explaining the drivers of spot and futures prices of crude oil taking into consideration the theoretical model presented by Just and Just (2008) and empirically examining the factors. The paper provide empirical evidence that the prices of crude oil are driven by many factors which are controlled by OPEC countries and that spot prices are partially driven by futures prices of crude oil. The paper also provides evidence that OPEC manipulative buying in the futures market was a key reason for the price spike, while the fall in prices was due to the fact that manipulation could not maintain its strong effect in increasing prices and was met by a stronger force of factors that were a result of the economic meltdown.

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Unrestricted.

Keywords

Futures price, Spot price, Organization of Petroleum Exporting Countries (OPEC), Manipulation, Futures market

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