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Do OPEC announcements influence oil prices?

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  • Loutia, Amine
  • Mellios, Constantin
  • Andriosopoulos, Kostas

Abstract

This paper investigates the effect of OPEC production decisions (increase, cut, maintain) on both WTI and Brent crude oil prices between Q1 1991 and Q1 2015 by employing the event study methodology and by using two indices as benchmarks (BCI and S&P GSCI). We employ an EGARCH model to take into account the high volatility of oil prices and some stylized facts characterizing this volatility. We find that the impact of OPEC’s announcements on oil prices (i)evolves over time and among decisions, (ii) is more significant for production cut and maintain, (iii) is different for WTI and Brent prices, and (iv) is sensitive to the benchmark index. Moreover, OPEC’s decisions depend on the exploration and extraction cost of more expensive/unconventional oil resources.

Suggested Citation

  • Loutia, Amine & Mellios, Constantin & Andriosopoulos, Kostas, 2016. "Do OPEC announcements influence oil prices?," Energy Policy, Elsevier, vol. 90(C), pages 262-272.
    • Handle: RePEc:eee:enepol:v:90:y:2016:i:c:p:262-272
    DOI: 10.1016/j.enpol.2015.11.025
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    More about this item

    Keywords

    WTI crude oil; Brent crude oil; OPEC; Announcements; Event study; EGARCH;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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