Bidirectional causality in oil and gas markets

- We study linkages between crude oil and natural gas markets.
- We use inventory announcements and high-frequency, intraday oil and gas futures prices.
- We show a bidirectional causal relationship.
- Both inventory gluts and shortages have a cross-commodity effect.
- This holds not only for the nearby futures contract but also for the following six months' contracts.

Do events in the natural gas market cause repercussions in the crude oil market? This paper studies linkages between the two markets using high-frequency, intraday oil and gas futures prices. By analyzing the effect of weekly oil and gas inventory announcements on price volatility, we show a bidirectional causal relationship. Both inventory gluts and shortages have a cross-commodity effect on price volatility not only for the next-month nearby futures contract but also for the following six months' contracts.