Comparison of the interdependence relationship between crude oil futures and spot in China and international crude oil markets − evidence from time-frequency and quantile perspectives

Abstract

To understand the heterogeneity in the relationship between global crude oil futures and spot markets, as well as the development level of China’s crude oil futures market, this paper adopts wavelet and quantile methods to explore the interdependencies between China and international crude oil futures and spot markets. The research findings indicate that crude oil markets experience significant volatility and the connection between crude oil futures and spot markets intensifies during major events. For WTI and Brent crude oil futures and spot markets, the lead-lag relationship is mainly reflected in the short and medium term. For China and Dubai crude oil futures markets, no clear evidence was found that the crude oil futures market leads the crude oil spot market. Based on the quantile coherency results, the coherency between futures and spot markets in WTI and Brent crude oil futures and spot markets decreases as the time frequency increases. For the 0.05|0.05 quantile, the positive correlation between Chinese crude oil futures and spot markets decreases more rapidly with increasing time frequency. During the periods of the COVID-19 pandemic and the Russia-Ukraine conflict, the dependence between crude oil futures and spot markets at different quantiles has changed.