Does OPEC influence crude oil prices? Testing for co-movements and causality between regional crude oil prices

Using high-frequency data the co-movements among crude oil prices are analysed in order to address the question of regionalization of the world crude oil market. Time-series econometrics in the form of error-correction modelling is applied for daily crude oil price data covering the time period 1988 to 2004 and in this framework topics like weak and strong exogeneity among three major oil prices - represented by Brent, OPEC and Texas (WTI) - are addressed. The empirical results are that causality is most likely bi-directional among these crude oil prices - and hence rejecting a regionalization hypothesis of the global oil market - and also an influence from the OPEC oil price towards Bent and WTI, which are usually claimed to have a benchmark role.