Price Dynamics in Global Crude Oil Markets

We use high-frequency data to better characterize price dynamics in global crude oil markets. Initially, we provide much-needed quantitative evidence on interactions between physical and financial layers of the Brent market, highlighting the ICE Brent futures contract as the overwhelming source of price discovery in this market. Thereafter, we quantify the impact of oil supply constraints at Cushing, showing they are a significant determinant of ever decreasing levels of cointegration between Brent and WTI markets. Finally, against this backdrop we show that, on days where ICE Brent and CME WTI futures remain cointegrated, the latter still dominate price discovery.