Crude Oil Price and Speculative Activity A Cointegration Analysis

Abstract

The aim of the study is to discuss the relationship of the crude oil price,
speculative activity and fundamental factors. An empirical study was conducted
with a VEC model. Two cointegrating vectors were identified. The first vector
represents the speculative activity. We argue that the number of short noncommercial positions increases with the crude oil stock and price, decreases
with the higher number of long non-commercial positions. A positive trend of
crude oil prices may be a signal for traders outside the industry to invest in the
oil market, especially as access to information could be limited for them. The
second vector represents the crude oil price under the fundamental approach.
The results support the hypothesis that the crude oil price is dependent on
futures trading. The higher is a number of commercial long positions, the greater
is the pressure on crude oil price to increase.