Survey_BKZ_2013

Abstract

Our objective is to compare the real-time out-of-sample forecast accuracy of selected product spread models for the average monthly real price of crude oil. This approach is consistent with the objective of government agencies reporting oil price forecasts. The baseline analysis focuses on the monthly average of the West Texas Intermediate (WTI) spot price since July 1986 as reported in the FRED database of the Federal Reserve Bank of St. Louis. This price refers to the U.S.-dollar price of a barrel of WTI crude oil for immediate delivery in Cushing, Oklahoma. WTI prices are commonly used as reference prices in writing contracts for the delivery of crude oil and are available in real time. The crude oil price predictors considered below rely on spot and futures prices for gasoline, heating oil and WTI crude oil. All predictors are available without delay and are not subject to revisions. The price of WTI crude oil futures is from Bloomberg. Averages of daily futures prices at maturities of 1 to 6 months are available starting in July 1986. The futures contract for conventional regular unleaded gasoline for delivery in New York Harbor ceased trading after the January 2007 contract. Starting in October 2005, it was replaced by a gasoline futures contract for reformulated blendstock for oxygenate blending (RBOB) for delivery in New York Harbor. We follow Chinn and Coibion (2013) in using the futures price for regular gasoline from July 1986 until December 2005 and the futures price of RBOB gasoline from January 2006 onwards. Daily gasoline futures prices are available at maturities of 1, 3 and 6 months from Bloomberg. We construct monthly averages, starting in July 1986 for 1- and 3-month contracts and starting in November 1986 for 6-month contracts, by averaging the daily futures prices. The corresponding spot price for delivery of regular gasoline in New York Harbor is obtained from the EIA. This series is available for the entire period of July 1986 until March 2013. There is no RBOB spot price series for delivery in New York, making it impossible to construct a gasoline spot price in the same way as for the futures contracts. Futures contracts for No. 2 Heating Oil are also for delivery in New York Harbor. We constructed averages of the daily futures price data provided by Bloomberg. For maturities of 1 through 9 months, the sample starts in July 1986, for the 12-month maturity, it starts in August 1989. The corresponding spot price since July 1986 is constructed as the average of the daily heating oil spot price provided by the EIA.