Arbitrage in natural gas markets?

Dehnavi, Jalal; Wirl, Franz; Yegorov, Yuri

doi:10.1142/s2335680415500180

Cited by 5 publications

(6 citation statements)

References 5 publications

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“…Wolfe and Rosenman (2014) find a bidirectional causal relationship between the two markets, which could also bias the announcement effect. Brown and Yücel (2009) and Dehnavi et al (2015) study gas-to-gas arbitrage between Europe and the US through the development of the market for liquified natural gas (LNG).…”

Section: Iiib4 Spillover Effects From Other Marketsmentioning

confidence: 99%

The Natural Gas Announcement Day Puzzle

Prokopczuk¹,

Simen²,

Wichmann³

2021

The Energy Journal

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This paper studies natural gas futures returns on EIA storage announcement days.More than 50% of the annual return is earned on these days. We find a significant difference between announcement and non-announcement day returns, which cannot be explained by the announcement surprise or other control variables. At the intraday level, the return splits half into a pre- and post-announcement part. The pre-announcement return is entirely generated on days when storage levels exceed analysts’ expectations casting doubt on explanations based on informed trading.After transaction and funding cost, a simple trading strategy yields substantial returns.Gas Markets, Announcement Effect, Storage News, Intraday

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Section: Iiib4 Spillover Effects From Other Marketsmentioning

confidence: 99%

The Natural Gas Announcement Day Puzzle

Prokopczuk¹,

Simen²,

Wichmann³

2021

The Energy Journal

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“…We have shown that the economic cost of LNG trade is positively related to regional natural gas price spreads between the exporting and importing regions. Tightness in capacity when demand for trade is high results in cost escalations that prevent profitable trade opportunities for traders (Dehnavi and Yegorov, 2012;Oglend et al, 2016). This can explain the cyclical co-movements of the LNG freight rate and cross-market natural gas price spreads in the aftermath of the Fukushima incident in 2011.…”

Section: Discussionmentioning

confidence: 99%

“…While these cost effects are known, an additional economic cost of LNG shipping that arises from time commitments in shipping has, to the best of our knowledge, not previously been highlighted in the literature. Dehnavi and Yegorov (2012) and Oglend et al (2016) investigate time varying economic cost and profitability of LNG trade. In this paper, we investigate how time commitments in shipping add to the economic cost of LNG trade and introduces an additional component to the economic shipping cost that is positively related to cross-market natural gas price spreads.…”

Section: Introductionmentioning

confidence: 99%

“…Recently, the U.S. shale gas revolution and the Fukushima incident have highlighted the compartmentalized nature of natural gas markets. These events have revealed how economic costs of LNG trade are positively related to regional natural gas price spreads, which limit profitable trade opportunities (Dehnavi and Yegorov, 2012;Oglend et al, 2016). Lumpy and time-consuming investments in regasification, liquefaction, and shipping makes supply of LNG trade infrastructure inelastic.…”

Section: Introductionmentioning

confidence: 99%

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Time Commitments in LNG Shipping and Natural Gas Price Convergence

Øglend¹,

Osmundsen²,

Kleppe³

2020

The Energy Journal

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Inter-continental Liquefied Natural Gas (LNG) trade can facilitate the development of a global natural gas market. However, in addition to explicit shipping costs, such trade requires time commitments in shipping due to the long hauls of many shipping routes. We show that this time commitment adds an additional economic cost to LNG shipping, and creates a positive relationship between the economic cost of LNG trade and regional natural gas price spreads. Necessary time commitment therefore augments the other costs of LNG trade, and contributes to weaken the ties between global natural gas markets.

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“…West Texas Intermediate (WTI), US average prices for crude oil, Brent or a basket of crude oil. 7 However, these differences are irrelevant for long-term forecasting since there exists, by and large, a 'common oil pool' opposite to natural gas with substantial regional price differences, which seem puzzling, see Dehnavi et al (2015).…”

Section: Forecast Efficiencymentioning

confidence: 99%

Are published oil price forecasts efficient?

2018

Self Cite

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Oil prices are crucial for a wide area of economic decisions ranging from households over business to economic policymaking. Therefore, oil price projections are a crucial input to economic models and to economic activity forecasts. This paper assesses the accuracy and efficiency of crude oil price forecasts published by different organisations, think tanks and companies. Since the sequence of published forecasts appears as smooth, the weak efficiency criterion is clearly violated. Even combining forecasts, cannot increase efficiency due to high correlation among various forecasts. This pattern of oil price forecasts can be attributed to combining myopia (use current oil price levels as a basis) with Hotelling‐type exponential growth. Another behavioural explanation in source of inefficiencies is that forecasters prefer to harmonise their forecasts with other forecasters in order to be not an outlier.

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Arbitrage in natural gas markets?

Cited by 5 publications

References 5 publications

The Natural Gas Announcement Day Puzzle

The Natural Gas Announcement Day Puzzle

Time Commitments in LNG Shipping and Natural Gas Price Convergence

Are published oil price forecasts efficient?

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