LAUSR

We develop extensions that introduce regression structure to the multi-factor stochastic models of commodity futures price term structure dynamics. We demonstrate the accuracy with which these models can be calibrated to oil futures data and how they improve on existing models both in model fit and in model interpretation. We found leading observable factors that contribute to explaining the term structure of oil futures, in the presence of long and short term stochastic factors, included the dollar index, inventories, commodity indices and risk aversion associated to financial intermediaries. Furthermore, we determine the time frame on which these factors are explanatory.