A1645
Title: Reasons behind words: OPEC and the oil market
Authors: Marc Joets - IESEG School of Management (France) [presenting]
Celso Brunetti - Bocconi University and Federal Reserve Board (United States)
Valerie Mignon - Universite Paris Nanterre and CEPII (France)
Abstract: The content of the Organization of the Petroleum Exporting Countries (OPEC) communications and whether it provides valuable information to the crude oil market is analyzed. To this end, an empirical strategy is derived to measure OPEC's public signal and test its credibility. Using structural topic models, several topics are identified in OPEC narratives. It is shown 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. It is also found that OPEC communication is credible, reduces oil price volatility, and prompts market participants to rebalance their positions.
