Korean Energy Economic Review ISSN:1599-7057(Print) 에너지경제연구

This study empirically analyzes the relationship between convenience yields and inventories of major energy commodities to check the validity of the theory of storage. In addition, it tests the comparative advantages between two approximating methods of convenience yields. The distinct features of this study are that it performs statistical analyses with more combinations compared to the previous studies, and that it examines the comparative advantages between two approximates of convenience yields in a more objective way. The sample used in empirical analyses include four energy commodities such as natural gas, crude oil, gasoline and heating oil trading in the U.S. commodity market. Total sample period covers 541 weeks from January 2010 to May 2020. The empirical results are summarized as follows. First, except for some combinations there are statistically significant inverse relationships between inventories and convenience yields for all of four energy commodities. That is, if inventory increases (decreases), the convenience yield of corresponding commodity drops (rises). The sensitivities of convenience yields in response to the fluctuations of inventory levels appear in order of natural gas, gasoline, crude oil and heating oil. Second, Wald chi-square tests prove that the convenience yields using the cost-of-carry method are more properly approximated compared to those using the option-based approach.