The Oil Market Reactions to OPEC’s Announcements

Yue Liu, Hao Dong and Pierre Failler
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Yue Liu: Hunan Institute of Technology, School of Economics and Management, Hengyang 421001, China
Hao Dong: School of Economics and Statistics, Guangzhou University, Guangzhou 510006, China
Pierre Failler: Economics and Finance Group, Portsmouth Business School, University of Portsmouth, Portsmouth PO1 3DE, UK

Energies, 2019, vol. 12, issue 17, 1-15

Abstract: Because of the crucial implications of the market power of OPEC, the aim of this paper was to investigate the oil asymmetric market reactions, such as the price and risk reactions, to OPEC’s announcements. Specifically, this paper first explored the oil price reactions to OPEC’s announcements and their heterogeneity to depict the directional role of OPEC based on event study methodology. Furthermore, this paper analyzed the oil risk reactions in the framework of a linear model. Our findings reveal several key results. The oil price reactions to OPEC production decisions behave quite heterogeneously in three kinds of decisions. Specifically, the reaction to announcements of a production increase shows an invert “U” shape, whereas there is a linear effect of cut announcements. Otherwise, when a maintain decision is announced, the oil prices have no obvious change over the sample period. Additionally, the oil risk reactions to OPEC’s announcements are heavily related to the interaction item between OPEC decisions and its production over full sample periods. Furthermore, OPEC’s role in promoting stability in crude oil markets by changing its production shows a heterogeneous condition after global financial crisis.

Keywords: market reactions; OPEC; oil price reactions; oil risk reactions; production decision (search for similar items in EconPapers)
JEL-codes: Q Q0 Q4 Q40 Q41 Q42 Q43 Q47 Q48 Q49 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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