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Crude Oil Prices; Trends and Forecast

Author

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  • Noureddine Krichene

Abstract

Following record low interest rates and fast depreciating U.S. dollar, crude oil prices became under rising pressure and seemed boundless. Oil price process parameters changed drastically in 2003M5-2007M10 toward consistently rising prices. Short-term forecasting would imply persistence of observed trends, as market fundamentals and underlying monetary policies were supportive of these trends. Market expectations derived from option prices anticipated further surge in oil prices and allowed significant probability for right tail events. Given explosive trends in other commodities prices, depreciating currencies, and weakening financial conditions, recent trends in oil prices might not persist further without triggering world economic recession, regressive oil supply, as oil producers became wary about inflation. Restoring stable oil markets, through restraining monetary policy, is essential for durable growth and price stability.

Suggested Citation

  • Noureddine Krichene, 2008. "Crude Oil Prices; Trends and Forecast," IMF Working Papers 08/133, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:08/133
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    References listed on IDEAS

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    1. Krichene, Noureddine, 2002. "World crude oil and natural gas: a demand and supply model," Energy Economics, Elsevier, vol. 24(6), pages 557-576, November.
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    7. Noureddine Krichene, 2007. "An Oil and Gas Model," IMF Working Papers 07/135, International Monetary Fund.
    8. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
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    12. Noureddine Krichene, 2006. "World Crude Oil Markets; Monetary Policy and the Recent Oil Shock," IMF Working Papers 06/62, International Monetary Fund.
    13. repec:dau:papers:123456789/1392 is not listed on IDEAS
    14. Helyette Geman & P. Carr & D. Madan & M. Yor, 2003. "Stochastic Volatility for Levy Processes," Post-Print halshs-00144385, HAL.
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    Cited by:

    1. Nazlioglu, Saban & Erdem, Cumhur & Soytas, Ugur, 2013. "Volatility spillover between oil and agricultural commodity markets," Energy Economics, Elsevier, vol. 36(C), pages 658-665.
    2. Chevillon, Guillaume & Rifflart, Christine, 2009. "Physical market determinants of the price of crude oil and the market premium," Energy Economics, Elsevier, vol. 31(4), pages 537-549, July.

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