Leading Indicators for Arabian Gulf Oil Tanker Rates

Abstract

In this paper, price drivers for the Arabian Gulf oil tanker rates were derived from the Bayesian logistic regression to form a leading indicator. A universe of price drivers was filtered based on statistical criteria and speculative backtest results. Results showed that refining margins in Asia, crude production in the Arabian Gulf, the vessel utilisation rate and Brent-Dubai spreads were the most significant price drivers of TD3. A time series of these drivers indicates that Arabian Gulf production has a declining importance relative to the Brent-Dubai spreads since 2004. A vector error correction mechanism analysis of the TD1 and TD3 benchmarks indicates that TD1 returns lag behind TD3 rates. Copyright 2008 The Author. Journal compilation 2008 Organization of the Petroleum Exporting Countries.