Intraday Return Predictability in the Crude Oil Market: The Role of EIA Inventory Announcements
43 Pages Posted: 9 Apr 2021
Date Written: April 8, 2021
We study the impact of the announcements released by the US Energy Information Administration (EIA) crude oil storage every Wednesday at 10:30 ET (the beginning of the third half-hour interval) on intraday return predictability, that is, intraday momentum. Our results indicate that returns on both the first half-hour and third half-hour on EIA announcement days can significantly and positively predict the returns in the last half-hour, whereas, on non-EIA announcement days, only returns in the first half-hour have significant predictability. The dominant source of prediction in the first half-hour return also differs between EIA announcement and non-announcement groups, the market open and overnight component, respectively. EIA announcements contribute to intraday momentum because they attract more informed traders and because the period surrounding their release is often associated with a reduction in liquidity. Substantial economic gains can be made by using efficient intraday predictors as trading signals.
Keywords: Crude oil market, EIA announcements, Intraday momentum, Return predictability
JEL Classification: G14; G17; Q40
Suggested Citation: Suggested Citation