Screening for light crude oil and market comovements

This research is structured as follows: the introduction in the first section presents an overview of the method and outlines the study's objective. The literature review provides related work referring to the crude oil market and the application of hierarchical correlation clustering to characterize current developments in both fields. It is followed by the research and methodology, characterizing the implemented method and algorithm and providing information about the data preprocessing steps. The publication is completed by the results and discussion section, presenting the visualized cluster mapping results. The project's outcome is summarized in the concluding section, reflecting current and possible future implementations of the screening. Areas for future investigations are mentioned. All tables are provided in the appendix to facilitate the reading flow. Acronyms and abbreviations are indicated in the appendix.This study aimed to perform a screening for economic interrelationships among market participants from the stock market, global stock indices, and commodities from fossil energy, agricultural, and the metals sector. Particular focus was put on the comovements of the light crude oil benchmarks West Texas Intermediate (WTI) and Brent crude oil. In finance research and the crude oil markets, identifying novel groupings and interactions is a fundamental requirement due to the extended impact of crude oil price fluctuations on economic growth and inflation. Thus, it is of high interest for investors to identify market players and interactions that appear sensitive to crude oil price volatility triggers. The price development of 14 stocks, 25 leading global indices, and 13 commodity prices, including WTI and Brent, were analyzed via data mining applying the hierarchical correlation cluster mapping technique. All price data comprised the period from January 2012 – December 2018 and were based on daily returns. The technique identifies and visualizes existing hierarchical clusters and correlation patterns emphasizing comovements that indicate positively correlated processes. The method successfully identified clustering patterns and a series of relevant and partly unexpected novel comovements in all investigated economic sectors. Although additional research is required to reveal the causative factors, the study offers an insight into in-depth market interrelationships.123129

The relationship between European Brent crude oil price development and US macroeconomy

Abnormal volatility has a damaging effect on the macroeconomy and is seen as a measure of risk in asset and commodity markets. This investigation had the aim to analyze the supposed transatlantic volatility inducing effect of the most prominent scheduled macroeconomic news announcements from the United States (US) on Brent Blend crude oil price intraday volatility over a period of seven years from 2012 to 2018. The objective was to generate a ranking list of scheduled US macroeconomic news that forecast high intraday volatility episodes at precise points in time. A total of 38 US news was analyzed using a data mining workflow. Data modeling was conducted using a simple ordinary least squares regression model and performed with programming language Python. A one hour window of rolling standard deviation based on one minute high-frequency closing prices were applied. As a result, 20 scheduled US macroeconomic news was successfully identified to significantly impact Brent crude oil price volatility. The model strongly supports the forecast of high price fluctuations and provides an opportunity for market players to adjust their risk management strategies right in time

Ranking of US macroeconomic news impacting WTI crude oil volatility risk

This study had the purpose to investigate the impact of 38 scheduled major United States (US) macroeconomic news on WTI crude oil intraday volatility for the period 2012-2018. It was the aim to provide a news ranking that indicates upcoming high volatility episodes at a specific point in time. The West Texas Intermediate (WTI) light crude oil represents a benchmark since it has a signal effect on market players. High crude oil price volatility is a measure of risk and known to increase inflation, to affect producers, consumers, and investors and to destabilize economic growth. In this research approach one-minute high-frequency bid close prices provided the basis for a 1h window rolling standard deviation. Data modeling was performed using simple and multiple robust ordinary least squares (OLS) regression performed with programming language Python. The model successfully identified 21 significant news announcements in both, the simple and multiple regression models, however, simple OLS-regression appears to be more sensitive. It also provided a ranking of US news impacting WTI volatility risk. The results support the prediction of approaching high price volatility and thus, display an opportunity for market participants and decision-makers to minimize risk

Application of Open Web API: The Impact of Crude Oil Stocks Change Announcements on Crude Oil Price Volatility

This interdisciplinary study focuses on the impact of financial news announcements on crude oil price volatility. The information released by free Open web API Services is increasing rapidly. So far the correlation between oil price and news announcements was described based on daily crude oil closing prices. Localizing the exact starting point of increasing volatility requires intraday price changes. We propose an interdisciplinary IT-method to extract intraday crude oil price data from Open web API Services to capture the exact effect of the US inventory announcements at the time of news arrival. Intraday data in 30minutes intervals were applied. We found that volatility decreases before the arrival of the announcement and increases afterwards. For capturing the effect of unexpected amount of change in inventory, the difference between real and expected amount of change was introduced in the model and is statistically significant. Further studies on this issue will be performed