Reasons Behind Words: OPEC Narratives and the Oil Market

Celso Brunetti, Marc Joëts () and Valérie Mignon ()
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Marc Joëts: EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique

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Abstract: We analyze the content of the Organization of the Petroleum Exporting Countries (OPEC) communications and whether it provides valuable information to the crude oil market. To this end, we derive an empirical strategy which allows us to measure OPEC's public signal and test its credibility. Using Structural Topic Models, we identify several topics in OPEC narratives. We show that these topics are related to fundamental factors such as demand, supply, and speculative activity in the crude oil market, highlighting that OPEC narratives are highly linked to oil market volatility and traders' positions. We also find that OPEC communication is credible, reduces oil price volatility, and prompts market participants to rebalance their positions.

Keywords: OPEC Announcements; Structural Topic Models; Volatility; Traders’ Positions (search for similar items in EconPapers)
Date: 2023
Note: View the original document on HAL open archive server: https://hal.science/hal-04196053
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Working Paper: Reasons Behind Words: OPEC Narratives and the Oil Market (2024)
Working Paper: Reasons Behind Words: OPEC Narratives and the Oil Market (2023)
Working Paper: Reasons Behind Words: OPEC Narratives and the Oil Market (2023)
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