publication . Article . 2004

COST OF CARRY, CAUSALITY AND ARBITRAGE BETWEEN OIL FUTURES AND TANKER FREIGHT MARKETS

Amir H. Alizadeh; Nikos K. Nomikos;
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  • Published: 08 May 2004 Journal: Transportation Research Part E: Logistics and Transportation Review, volume 40, pages 297-316 (issn: 1366-5545, Copyright policy)
  • Publisher: Elsevier BV
Abstract
This paper investigates the dynamic relationship between oil futures and spot markets and tanker freight rates across two major tanker routes. In particular, we examine the validity of the cost of carry relationship in the WTI futures market, which suggests that the difference between physical and futures crude oil prices should reflect the transportation costs. We also examine whether the futures-physical oil differential contains information regarding tanker freight rate formation. Using physical crude oil prices for the Brent and Bonny markets, WTI futures prices and freight rates we find no evidence to support the existence of a relationship between tanker f...
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