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Usefulness of the Forward Curve in Forecasting Oil Prices

Author

Listed:
  • Akira Yanagisawa

    (Institute of Energy Economics, Japan)

Abstract

When people analyse oil prices, the forward curve is often referred to as it reflects the average view among market participants. In this paper, to what extent the forward curve provides useful information in forecasting oil prices was analysed quantitatively. Although the usefulness of the forward curve is confirmed in forecasting oil prices, the effect in reducing forecast error is small. Additionally, the forward curve is actually useful for one week ahead and for one month ahead in daily and weekly forecasts, respectively. However, the forward curve is scarcely useful in long-term forecast.

Suggested Citation

  • Akira Yanagisawa, 2009. "Usefulness of the Forward Curve in Forecasting Oil Prices," Energy Working Papers 22969, East Asian Bureau of Economic Research.
  • Handle: RePEc:eab:energy:22969
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    File URL: http://www.eaber.org/node/22969
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    More about this item

    Keywords

    oil prices; forward curve; price forecasting;

    JEL classification:

    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • Q47 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy Forecasting

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