OPEC announcements and uncertainty: When does the OPEC matter?

Absztrakt (kivonat)

I analyse the impact of the OPEC production quota decision on the price of WTI crude oil futures between 1985 and 2020. Employing an event study methodology, the abnormal returns around OPEC announcements are estimated with a GARCH model to account for time-varying volatility and other stylized facts in the crude oil market. The findings regarding the announcements indicate that the OPEC decisions accommodate global crude oil demand factors and geopolitical affairs given that geopolitical risk and world industrial production significantly affect price movements of crude oil in the announcement window. Other measures of risk and uncertainty do not seem to have any impact on crude oil prices around the event window. The results are robust to alternative specifications of the abnormal return model, different components of geopolitical risk, and alternative rollover methods of WTI crude oil futures contracts.