1. The Impact of International Oil Price on Asian Natural Gas Premium Based on Dynamic Autoregressive Model
Presented By: Xinlei Yang
School of Business Administration,
China University of Petroleum (Beijing)

2. Agenda
Introdution
Methods
Results
Conclusion

3. Introduction
Compared with North America and Europe, the premium on natural import gas price has been higher in Asia-Pacific region for a long period. Natural gas Inter-Regional price spread has been mainly under the influence of oil price.
The oil price has effect on Natural gas Inter-Regional price spread via influence on natural gas pricing(mainly LNG pricing method, linked to oil price) and energy substitutes.

4. Methods
Use the dynamic autoregressive model (VAR) to analyze oil price and natural gas -- Asia Europe region price spread(AERS), Asia-North American natural gas region price spread (ANARS) Interaction relationship by using monthly data from 2007 to 2015.
Then, using interval time VAR model to test the asymmetry of oil price to Natural gas Inter-Regional price spread in different periods, and to test the endogeneity of natural gas Inter-Regional price spread.

5. Unit Root test：ADF test

6. Johansen cointegration test

7. Granger test
So brent is AERS and ANARS Granger Causes, while ANARS is AERS Granger cause.

8. Var Model and Stability Test

9. Impulse Response Function (IRF)

13. AERS Variance Decomposition
ANARS fluctuations mainly from BRENT and AERS, from their contribution less than the sum contribution of BRENT and AERS.

14. ANARS Variance Decomposition
Compared with the variance of AERS, ANARS can be found to be more susceptible to oil price and other regional prices than AERS.

15. Endogenous test
There is a certain endogeneity of regional natural gas price spread, and the influence of oil price on natural gas price spread is the same.

16. Results
The fluctuation of oil prices has a significant effect on the Asian-American natural gas regional spreads and the Asian-European natural gas regional spreads, and the AERS and ANARS will also affect each other.
ANARS and AERS are different in response to oil price fluctuations, while the interaction effect between ANARS and AERS is asymmetric. The contribution of oil price fluctuations to AERS and ANARS volatility was 11.85% and 32.15%. The contribution of AERS to ANARS was 29.43%, while ANARS was 7.76% for AERS.
The ANARS is more intense reflection of oil prices

17. Conclusions
In the oil price at a higher price or a stable recovery period, consider strengthening trade with North American natural gas.
Strengthen development and utilization of domestic and foreign resources and enhance resource guarantee capacity.
Establish a Gas Trading Center to improve bargaining power.

18. Thanks!