DETERMINANTS OF PRICE OF CRUDE OIL WEST TEXAS INTERMEDIATE

Abitur Asianto; Hermanto Siregar; Roy Sembel; Tubagus Nur Ahmad Maulana

Universitas Indonesia Conferences, Asia Pacific Business and Economics Conference

Abitur Asianto, Hermanto Siregar, Roy Sembel, Tubagus Nur Ahmad Maulana

Last modified: 2017-12-21

Abstract

The crude oil West Texas Intermediate (WTI) price shocks affect the international trade as well as the domestic economy of a country and becomes one of the central issues in today's international economic assessment. This study analyzes determinants of WTI price to predict the percentage change as a result of determinants change. It employes vector error correction model and uses monthly data of WTI price, supply, demand, gold, S&P 500, T-Note, U.S. dollar index and U.S. GDP from February 1990 to July 2017. Empirical results indicate that WTI supply and demand are determinants of WTI prices. The supply variable is a major determinant of WTI price. An increase in growth of WTI supply will lead to a decrease in growth of price. In otherwise, an increase in growth of WTI demand will lead to an increase in growth of price.

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