Are crude oil markets cointegrated? Testing the co-movement of weekly crude oil spot prices

摘要

The emergence of large, persistent price differentials between land-locked North American crude oils and crude oils with access to tidewater in 2011 has cast doubt on the "one great pool" hypothesis first proposed by Adelman (1984). This article reevaluates the "one great pool" hypothesis by analyzing the co-movement of weekly crude oil spot prices from different geographic regions for the period from May 2, 2008 to June 8, 2018 using a cointegration approach that allows for endogenously determined structural breaks. The results presented in this article indicate crude oil prices, for similar and different quality crude oils, are cointegrated with a structural break, suggesting world oil markets are still integrated. Estimated structural break dates range from the July 30, 2010 to November 13, 2015, with structural breaks between landlocked North American crude oils and tidewater crude oils occurring between July 2010 and August 2011. These break dates are consistent with the beginning of the unconventional crude oil production boom in North America and propose that this significant event may have changed the long-run relationship between land-locked North American crude oils and tidewater crude oils.