Accessible Version
Convenience Yields, Risk Premiums, and the Interpretation of Oil Futures Prices During Times of Geopolitical Conflict, Accessible Data
Figure 1. Average WTI crude oil futures price curves for selected historical periods
The figure plots average futures prices against futures maturity for four historical periods. The curve for “2000 – Present” is nearly flat at about $60. The curve for “COVID Oil Supply Glut” is low overall and slopes upward from about $13 to about $26. The curve for “Early Ukraine Conflict” is high and slopes downward from about $105 to about $95. The curve for “Middle East Conflict” is lower than the Ukraine conflict curve, but slopes down more sharply, from about $90 to about $75.
Sources: CME Datamine, U.S. Energy Information Administration via FRED, Authors' calculations.
Figure 2. WTI crude oil futures prices and futures-implied net convenience yields over time
This figure contains two panels. The top panel plots prices for spot oil and oil futures from 2000 to 2026. Over the period prices fluctuate over a range from about $30/Bb. To about $150/Bbl. The lines shows that prices spike upward during periods when oil supply is constrained, and spikes downward when there are oil supply gluts. The bottom chart shows net convenience yields for the same contracts over the same time period. Net convenience yields generally hover near zero. They vary less than prices, but they spike upward and downward in response to supply and demand shocks in a similar way.
Notes: Red shading denotes negative oil supply shocks (1/3/03 to 6/30/03; 2/24/22 to 5/24/22; 2/26/28 to present). Blue shading denotes negative oil demand shocks (8/15/08 to 6/30/09; 3/11/20 to 6/1/21).
Sources: CME Datamine, U.S. Energy Information Administration via FRED, Authors' calculations.
Figure 3. Top-of-book market depth for WTI oil futures by maturity bucket
The figure shows a stacked area chart of top-of-book market depth for oil futures contracts of various maturities. In general top-of-book market depth was low from 2006 to 20015 but expanded dramatically in later years. However, the chart also shows that top-of-book depth fell dramatically in the early months of the Ukraine conflict, as well as during the current Middle East conflict.
Notes: Red shading denotes negative oil supply shocks (1/3/03 to 6/30/03; 2/24/22 to 5/24/22; 2/26/28 to present). Blue shading denotes negative oil demand shocks (8/15/08 to 6/30/09; 3/11/20 to 6/1/21 ). The key identifies areas in order from bottom to top.
Sources: LSEG Tick History, Authors' calculations.
Figure 4. 90-day rolling correlation between daily WTI spot returns and S&P 500 index returns
The figure shows a line plot of the 90-day rolling correlation between spot oil prices and equity prices. During most periods the correlation is near or above zero, but it was strongly negative during the early Iraq conflict in 2003, the early Ukraine conflict in 2022, and the Iran conflict in 2026.
Sources: U.S. Energy Information Administration via FRED, Authors' calculations.
Figure 5. Estimated model parameter using an expanding data window and exponential decay weights
The chart shows two rows of three panels. The top row shows estimated slope coefficients for 3-, 6-, and 12-month futures contracts from 2005 to about 2026. These estimates are near zero and are never statistically significant. The bottom row shows the same information for slope coefficients. In this case, the slope coefficients are near zero until about 2015, at which point they begin to shift upward dramatically. By about 2020 all slope coefficients are significantly greater than zero.
Notes: 90 percent confidence interval shown in gray.
Sources: CME Datamine, U.S. Energy Information Administration via FRED, Authors' calculations.
Figure 6. Fitted WTI futures risk premiums over time
The line plot shows estimated risk premiums for 3-, 6-, and 12-month futures contracts from 2000 to mid-2026. The chart shows that risk premiums are usually near zero or slightly positive, but they drop sharply into negative territory during the Iraq war, the early Ukraine war, and the Middle East conflict.
Notes: Red shading denotes negative oil supply shocks (1/3/03 to 6/30/03; 2/24/22 to 5/24/22; 2/26/28 to present). Blue shading denotes negative oil demand shocks (8/15/08 to 6/30/09; 3/11/20 to 6/1/21).
Sources: CME Datamine, U.S. Energy Information Administration via FRED, Authors' calculations.