Deconstructing oil price surprises around OPEC announcements

Naafey Sardar ()
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Naafey Sardar: St. Olaf College

Economics Bulletin, 2026, vol. 46, issue 3, 982 - 993

Abstract: This paper revisits the identification of oil price shocks using high-frequency surprises around OPEC announcements. While previous studies have used changes in oil futures prices to proxy for supply shocks, recent evidence suggests that these surprises reflect a combination of demand factors. To address this identification challenge, I use a Bayesian structural vector autoregression (VAR) model and identify oil supply, inventory demand, and aggregate demand shocks by imposing sign-restrictions on high-frequency surprises in oil futures, the S&P 500, and the one-year U.S. bond yield. My analysis highlights that the response of bond yields to OPEC announcements may contain important information about the source of the oil shock.

Keywords: Oil shocks; OPEC; inventory; demand; supply (search for similar items in EconPapers)
JEL-codes: G1 Q4 (search for similar items in EconPapers)
Date: 2026-09-30
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