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Oil Price Projection Model

Author

Listed:
  • Farid Muradzada

    (Central Bank of Azerbaijan Republic)

  • Khazan Bakhshaliyev

    (Central Bank of Azerbaijan Republic)

Abstract

This study develops a forecasting framework for Brent crude oil prices based on the fundamental drivers of the global oil market, namely demand, supply, and market expectations. The estimation is conducted using quarterly time-series data covering the period 1994–2025 and employs a Vector Autoregressive (VAR) model. The results indicate that the proposed model demonstrates strong forecast performance under conditions of high oil price volatility. The forecasting error of the model is lower than that of benchmark models. Furthermore, the findings confirm that geopolitical tensions, regional conflicts, and uncertainty in global energy markets have a significant impact on oil price dynamics through oil futures prices.

Suggested Citation

  • Farid Muradzada & Khazan Bakhshaliyev, 2025. "Oil Price Projection Model," Working Papers 2503, Central Bank of Azerbaijan Republic.
    • Handle: RePEc:aze:wpaper:2503
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    Keywords

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    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy
    • Q47 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy Forecasting

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