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Natural Gas Storage Forecasts: Is the Crowd Wiser?

Adrian Fernandez-Perez, Alexandre Garel, and Ivan Indriawan

Year: 2020
Volume: Volume 41
Number: Number 5
DOI: 10.5547/01956574.41.5.afer
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Abstract:
This paper examines the usefulness of crowdsourced relative to professional forecasts for natural gas storage changes. We find that crowdsourced forecasts are less accurate than professional forecasts on average. We investigate possible reasons for this inferior performance and find evidence of a greater divergence of opinions and a lower incorporation of publicly available information among crowd analysts. We further show that crowdsourced consensus forecast does not influence the market�s expectation of gas storage changes beyond what is already contained in professional consensus forecast, suggesting that crowdsourced forecasts provide little new information. Overall, our results indicate that the incremental usefulness of crowdsourced forecasts for gas market stakeholders is very limited.



The Negative Pricing of the May 2020 WTI Contract

Adrian Fernandez-Perez, Ana-Maria Fuertes, and Joelle Miffre

Year: 2023
Volume: Volume 44
Number: Number 1
DOI: 10.5547/01956574.44.1.afer
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Abstract:
This paper sheds light on the negative pricing of the May 2020 WTI futures contract (CLK20) on April 20, 2020. The super contango of early 2020, triggered by COVID-19 lockdowns and geopolitical tensions, incentivized cash and carry (C&C) traders to be long CLK20 and short distant contracts, while simultaneously booking storage at Cushing. Our investigation reveals that C&C arbitrage largely contributed to the lack of storage capacity at Cushing in April 2020 and the price crash relates to the reversing trades of many long CLK20 traders without pre-booked storage. Additional aggravating factors included a liquidity crush, staggering margin calls and potential price distortions due to the trade-at-settlement mechanism. The analysis suggests that claims from experts that hold index trackers responsible for the crash are unwarranted: Index trackers did not trigger the negative pricing, nor widen the futures-spot spread by rolling their positions to more distant contracts ahead of maturity.





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