Abstract

http://ssrn.com/abstract=1652834
 
 

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Do OPEC Members Know Something the Market Doesn’t? ‘Fair Price’ Pronouncements and the Market Price of Crude Oil


Bahattin Buyuksahin


Bank of Canada

Celso Brunetti


Federal Reserve Board

Michel A. Robe


American University - Kogod School of Business

Kirsten R. Soneson


Commodity Futures Trading Commission (CFTC)

August 3, 2010


Abstract:     
OPEC producers, individually or collectively, often make statements regarding the “fair price” of crude oil. In some cases, the officials commenting are merely affirming the price prevailing in the crude oil market at the time. In many cases, however, we document that they explicitly disagree with the contemporaneous futures price. A natural question is whether these “fair price” pronouncements contain information not already reflected in market prices. To find the answer, we collect the “fair price” statements made from 2000 to 2009 by officials from OPEC or OPEC member countries. Visually, the “fair price” series looks like a sampling discretely drawn (with a lag) from the daily futures market price series. Formally, we use several methodologies to establish that “fair price” pronouncements have little influence on the market price of crude oil and that they supply little or no new news to oil futures market participants.

Number of Pages in PDF File: 35

Keywords: Crude oil, OPEC, Fair price, Announcement, Market price, Event study, Kalman filter, Autoregressive Distributed Lag (ADL)

JEL Classification: E31, Q4, G14

working papers series


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Date posted: August 6, 2010 ; Last revised: August 31, 2010

Suggested Citation

Buyuksahin, Bahattin and Brunetti, Celso and Robe, Michel A. and Soneson, Kirsten R., Do OPEC Members Know Something the Market Doesn’t? ‘Fair Price’ Pronouncements and the Market Price of Crude Oil (August 3, 2010). Available at SSRN: http://ssrn.com/abstract=1652834 or http://dx.doi.org/10.2139/ssrn.1652834

Contact Information

Bahattin Buyuksahin
Bank of Canada ( email )
234 Wellington Street
Ontario, Ottawa K1A 0G9
Canada
Celso Brunetti
Federal Reserve Board ( email )
20th Street and Constitution Avenue NW
Washington, DC 20551
United States
Michel A. Robe (Contact Author)
American University - Kogod School of Business ( email )
4400 Massachusetts Avenue NW
Washington, DC 20816-8044
United States
202-885-1880 (Phone)
202-885-1946 (Fax)
Kirsten R. Soneson
Commodity Futures Trading Commission (CFTC) ( email )
1155 21st Street NW
Washington, DC 20581
United States
202-418-5304 (Phone)
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