Work

Exploring the Driving Forces of the Correlations Between China's Crude Oil Futures and Global and Regional Benchmarks

Year: 2025

Type: article

Abstract: ABSTRACT The launch of the Shanghai International Energy Exchange crude oil futures (INECOFs) is a milestone in China's path to a dominant position in the global energy market. As INECOFs attract more and more investors, understanding the long‐term correlations between INECOFs and global and regional benchmarks, as well as the driving forces of these correlations, is of paramount interest to investors wishing to conduct risk management and portfolio diversification. This article makes the first attempt to explore the determinants of such correlations using the mixed‐frequency approach. Our results show that INECOFs are highly correlated with the regional benchmarks and less correlated with the global benchmarks. China's crude oil imports, RMB internationalization, the RMB index, economic and trade policy uncertainty, and geopolitical risks significantly impact the dynamics of the correlations in question. China's gross industrial product and price levels cannot drive the movements of all the studied correlations.

Source: Journal of Futures Markets

DOI: 10.1002/fut.22569

Authors: Min Liu, Chien‐Chiang Lee

Institutions: Nanchang University, City University of Macau

Language: English

Topic: Market Dynamics and Volatility

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: bronze

Funders: China Postdoctoral Science Foundation, National Social Science Fund of China

Award: G5480554923