Trends and contagion in WTI and Brent crude oil spot and futures markets - The role of OPEC in the last decade

Highlights: • OPEC meetings increase correlation of WTI and Brent only in the short run. • Long-term movements of WTI and Brent confirm ''one-great-pool'' hypothesis. • Price leadership of WTI over Brent for spot and futures prices • Asymmetric spillover effects from WTI to Brent markets • OPEC meetings have only little impact on long-term price trends. - Abstract: This article examines the interconnectedness of WTI and Brent prices on different resolutions of price movements. Firstly, within a multivariate BEKK framework we identify high but volatile correlations with recurring highs around 0.8 and multiple periods of decoupling. OPEC meetings increase the correlation in the short run. Secondly, linear l₁-trends reveal that long-term movements of WTI and Brent are driven by the same dynamics, confirming the 'one great pool' hypothesis. OPEC meetings have only little impact on long-term price trends. Thirdly, we find leading effects of WTI over Brent by short-term trends of several days, especially in a negative direction. These trends have an asymmetrical effect on volatility; negative trends cause a stronger increase than positive trends. These findings are of interest to policy makers as well as hedging strategies of crude oil portfolios and provide insight into long-term movements of crude prices.