OPEC and the Oil Market

This paper studies the historical importance of OPEC for oil price fluctuations. An event-study approach is used to identify the effects of OPEC announcements on oil price fluctuations. Results show that price volatility is higher than typical around OPEC meetings. Also, members' compliance, a...

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Bibliographic Details
Main Author: Pescatori, Andrea
Other Authors: Nazer, Yousef
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2022
Series:IMF Working Papers
Subjects:
Oil
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
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300 |a 30 pages 
651 4 |a Saudi Arabia 
653 |a Energy: Demand and Supply 
653 |a Commodity price fluctuations 
653 |a Wealth 
653 |a Energy 
653 |a Industries: Energy 
653 |a Oil 
653 |a Investments: Energy 
653 |a Economic Forecasting 
653 |a Other Primary Products 
653 |a Production 
653 |a National accounts 
653 |a National income 
653 |a Economics of specific sectors 
653 |a Macroeconomics: Production 
653 |a Commodities 
653 |a Energy: General 
653 |a Currency crises 
653 |a Consumption; Economics 
653 |a Oil consumption 
653 |a Macroeconomics 
653 |a Commodity Markets 
653 |a Petroleum, oil & gas industries 
653 |a Economic & financial crises & disasters 
653 |a Oil prices 
653 |a Saving 
653 |a Environment 
653 |a Economics: General 
653 |a Natural Resources 
653 |a Informal sector; Economics 
653 |a Petroleum industry and trade 
653 |a Economic Development: Agriculture 
653 |a Prices 
653 |a Oil production 
653 |a Macroeconomics: Consumption 
653 |a Investment & securities 
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520 |a This paper studies the historical importance of OPEC for oil price fluctuations. An event-study approach is used to identify the effects of OPEC announcements on oil price fluctuations. Results show that price volatility is higher than typical around OPEC meetings. Also, members' compliance, a proxy for credibility, has strongly fluctuated over time. An ordered multinomial logit framework identifies the main factors that explain OPEC's decisions to cut, maintain, or boost members' oil production and is able to successfully predict OPEC meeting outcomes 66 percent of the time, between 1989 and 2019. Cyclical oil price fluctuations (as opposed to persistent shifts in levels) drive OPEC’s decisions, suggesting that OPEC's objective is to stabilize the oil price rather than countering fundamental shifts in demand and supply. Low OPEC’s market share reduces the probability of a production cut. Finally, the transparency of OPEC's statements has modestly improved between 2002 and 2019