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What Makes the Oil Pricing Center? The Impact of Futures Markets and Production

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  • Junlian Gong
  • Jun Nagayasu

Abstract

This study examines the impact of oil futures markets and production on the connectivity and speed of information transmission in a country’s spot oil market within the global network. First, we estimate the causal relationships between 12 spot oil markets using the existence and strength of transfer entropy as edges and weights to construct a series of dynamic networks for the global oil market. Second, we use a temporal network model to analyze changes in the connectivity, closeness, and betweenness of each oil market over different periods, and then compare these variations. Our findings indicate that Brent serves as the central hub of the global oil market, followed by the West Texas Intermediate and Minas markets. Moreover, the presence of oil futures markets significantly enhances the connectivity, information transmission speed, and hub role of spot markets. Oil production also positively impacts connectivity and betweenness; however, it does not have a significant relationship with the speed of information transmission.

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  • Junlian Gong & Jun Nagayasu, 2025. "What Makes the Oil Pricing Center? The Impact of Futures Markets and Production," TUPD Discussion Papers 71, Graduate School of Economics and Management, Tohoku University.
    • Handle: RePEc:toh:tupdaa:71
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    File URL: https://hdl.handle.net/10097/0002004114
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