Commodities, Volume 3, Issue 2 (June 2024) – 6 articles

In this study, we investigate the ability of three higher-order risk-neutral return cumulants to predict short maturity (weekly) returns of oil futures. Our data includes weekly West Texas Crude Oil futures options that expire in 7 days (7DTE). Using a model-free approach, we estimate these risk-neutral return cumulants at the beginning of each options expiration cycle. Our results suggest that the third risk-neutral return cumulant consistently predicts the returns of various oil futures (including WTI, Brent, Dubai, Heating Oil, and RBOB Gasoline). We compare our findings with 14 other predictors and offer a theoretical explanation for the negative coefficient observed for the 7DTE third risk-neutral return cumulant. Our theory connects higher-order risk-neutral return cumulants with the risk premiums of oil futures. Furthermore, our quantitative investment strategy favors the predictability of oil futures returns. Full article

We revisit, and document new facts regarding, the financialization of U.S. energy markets in 2000–2010. We show that, after controlling for macroeconomic factors and physical energy market fundamentals, the strength of energy markets’ co-movements with the U.S. stock market is positively related to the energy paper market activity of hedge funds that trade both asset classes. This relation weakens when credit risk is elevated. We find, in contrast, no link with the aggregate positions of commodity index traders in energy futures markets. Our findings have implications for the ongoing debate regarding the financialization of commodities. Full article

The COVID-19 pandemic, with increased home cooking and decreased restaurant dining, significantly altered seafood consumption patterns. By applying an ordered logit model to identify factors affecting seafood consumption during the pandemic, this study found that the shift in seafood consumption was driven by factors such as changes in meal preparation methods, more time spent at home, and shifts in financial situations. While take-out consumption boosted overall seafood intake, popular varieties saw a rise in home consumption, while high-end seafood suffered from decreased demand as consumers focused more on home dining. This study underscores the importance of supporting suppliers, restaurants, and retailers dealing with high-end seafood, as they face economic challenges due to reduced consumption. In summary, pandemic-induced restrictions on mobility led to a notable transition from restaurant-prepared seafood to home-cooked options, highlighting the need for targeted policies to aid affected sectors. Full article

This study aims to investigate the impact of the banking sector on economic growth and commodity prices. Through panel data analysis, the research explores the relationship between the banking sector and economic growth in Spain, France, and Romania from 2000 to 2020. The findings reveal a positive correlation between the strength of the banking sector and economic growth across these nations, underscoring its pivotal role in fostering economic expansion and subsequently improving commodity prices. Additionally, this study evaluates various regulatory measures crucial ensuring the banking sector’s sustainability and preventing financial crises, including credit risk management, lending policies, liquidity constraints, and international financing and investment strategies. By analyzing the interplay between regulatory measures and banking sector performance, incorporating variables such as non-performing loans, household debt, liquid liabilities, government consumption expenditure, foreign investments, and trade openness, this research provides policymakers with valuable insights to formulate effective strategies for promoting economic stability and ensuring the sustainability and growth of the banking sector. Full article

The Seychelles blue bond is an innovative finance mechanism that has played a pivotal role in shaping the global landscape of blue bonds. Seychelles leadership in the blue economy sets a significant precedent. However, this precedent has also raised concerns among various stakeholders. This study evaluates of Seychelles’ sovereign blue bond, which was co-developed by the government of Seychelles and the World Bank. Three themes are explored, how the blue bond relates to other actors and donors in the blue economy space of Seychelles; how the blue bond contributes to advancing the national agenda and blue economy of Seychelles; and the key strengths, enablers and weaknesses of the blue bond. A series of considerations for future blue financing and blue bond mechanisms are presented, based on the findings of this study, to ensure that financing extends beyond blue washing and contributes meaningfully to the holistic transition to a sustainable blue economy. Our findings imply significant considerations for stakeholders in sustainable finance, suggesting ways to enhance the efficacy of blue bonds and emphasising the need for further research on their long-term impact and integration with other financial instruments. Full article

This study presents a comprehensive bibliometric analysis conducted in R Studio of the scientific landscape regarding commodity markets, trading strategies, sustainable production, integration of technologies such as machine learning, and their economic impacts, covering publications from 1974 to 2023. Employing a sophisticated query in Scopus, we meticulously compiled and analyzed data, revealing an annual growth rate of 10.46% in related scientific publications, with an average citation rate of 6.60 per document. The results indicate sustained interest in commodity research over time, with a significant increase observed in scientific production, particularly since the early 2008s. International collaboration is prominent, reflecting the global nature of research in commodity markets. Key themes such as “futures markets”, “commodity prices”, and “energy commodities” emerge from the analysis of keywords and bigrams, highlighting areas of interest within the field. Additionally, thematic mapping highlights emerging and niche themes in commodity research, providing insight into evolving trends and areas of specialization. Factorial analysis of keywords reveals the underlying structures of association between key concepts, shedding light on the intricate dynamics of research in the field of commodities. This research delineates the complex interplay between commodity markets and global economic dynamics, offering invaluable insights for academics, policymakers, and market participants aiming to navigate the intricate world of commodities in the digital age. Full article