Examining the Effect of Speculation and Open Interest on the Crude Oil Futures Curve

Abstract

This paper looks at the effect of open interest and the activity of certain types of traders on the shape of the oil futures curve as well as the volatility of crude oil futures prices. We will also look at the negative roll yield that affects long investors in the crude oil futures market, especially those that invest in index tracking funds. Furthermore, we will consider the monthly patterns of investors to determine if there is an optimal time to "roll over" in order to avoid the negative roll yield as much as possible.