Authors:
Chinwe Roseline Okoye, E. Amos, C. Nkuturum
Addresses:
Department of Mathematics and Computer Science, Rivers State University, Port Harcourt, Rivers State, Nigeria.
Abstract:
This study examines the dynamic relationships between major global crude oil price benchmarks – Brent Blend (RCOBRET), West Texas Intermediate (RCOWTI), and Dubai/Oman (RCOD) – in the context of Nigeria's crude oil stock market using a Vector Error Correction Model (VECM). The results show that Brent plays a dominant role in both short-term and long-term price adjustments. The Estimated Error Correction Terms (ECTs) show that deviations from long-term equilibrium are significantly corrected by Brent and, to a lesser extent, by Dubai/Oman. In contrast, the yield on West Texas Intermediate crude oil prices shows limited convergence. The impulse response features and variance degradation indicate that Brent has a major impact on both the returns on crude oil prices in Dubai/Oman and West Texas Intermediate, with West Texas Intermediate being the most reactive to external shocks. The Granger causality test reveals a two-way causal relationship between the return on the crude oil price in Brent and Dubai/Oman, unidirectional causality from the return on the crude oil price in Brent to West Texas Intermediate, and no causal relationship between the return on the crude oil price in West Texas Intermediate and Dubai/Oman and also the model passed dynamic stability tests, confirming the system's robustness.
Keywords: Price and Benchmarks; Granger Causality; Variance Degradation; Oil Price Dynamics; Global Oil Benchmarks; Dynamic Stability Tests; Oil-Dependent Economy.
Received: 01/11/2024, Revised: 04/01/2025, Accepted: 11/03/2025, Published: 09/09/2025
DOI: 10.64091/ATITP.2025.000157
AVE Trends in Intelligent Technoprise Letters, 2025 Vol. 2 No. 3 , Pages: 127-142