Empirical study of the functional changes in price discovery in the Brent crude oil market

Oil is an important source of energy and strategic materials. Understanding the function of price discovery in the futures market, the role of the futures market can be better played, and it is of great significance to ensure the security of energy supply. In this paper, the relationship between futures price and spot price is investigated by means of econometrics, to study price discovery modes on the futures market. The Brent crude oil (2007 to 2016) future price and spot price data were used in the study. It is found that, in GS, IS and PT models, the IS and PT model have their own advantages, which can be combined with two models to calculate the level of price discovery while the GS model is invalid. Comparing the price discovery level from 2007 to 2016, most of the price discovery of the oil futures market is higher. At the same time, the volatility of price is not the main reason behind price discovery. The main factors leading to the decrease of price discovery are the development of the macroeconomy and the degree of price volatility.a.