A&F seminar “The Dynamics of Storage Costs”

01 December 21 13.00 – 14.00, NUBS 1.13

Guest Speaker: Dr Andrei Stancu

“The Dynamics of Storage Costs”

Abstract:

We document that the monthly storage cost of oil averages 0.50% of the spot price and varies over time. We decompose the basis, defined as the ratio of the spread between the futures and spot prices over the spot price, into the storage cost (scc) and the adjusted convenience yield (acyc) channels. The scc dominates the mean of the basis and accounts for nearly half of its variations. We show that the scc predicts future inventory growth and is the main conduit through which the predictive power of the basis for oil spot returns arises.

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