How the key factors will affect the market trading behaviors in Crude Oil Futures Market:An analysis on convenience yield, inventory level and price volatility.

Abstract: The paper focuses on three key factors in WTI crude oil futures market: Convenience yield, inventory level and price volatility. The main purpose of the paper is to investigate the relation between those three key factors and analyze how those key factors will affect the market trading behaviors. Market trading behaviors could be measured from various aspects though, our paper will use open interest, long & short position volume held by crude oil traders and long & short position held by money managers as dependent variables and to represent the market trading behaviors. Our empirical results have proved that the relation between the three factors is consistent with previous theories by using the most recent data. E.g. Convenience yield keeps a negative relation with Inventory level. However, our results showing how the key factors would affect the market trading behaviors are beyond our expectations. To summarize, convenience yield and inventory level indicate positive effects on dependent variables while price volatility mostly has negative impact on the dependent variables except for short position volume held by money managers.