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The Impact of OPEC Conference Outcomes on World Oil Prices 1984-2001

Franz Wirl and Azra Kujundzic

Year: 2004
Volume: Volume 25
Number: Number 1
DOI: 10.5547/ISSN0195-6574-EJ-Vol25-No1-3
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Abstract:
This paper investigates how far OPEC influences world oil markets. We ask the question: What is the impact of the decisions of the OPEC Conference, the supreme authority of the Organization of Petroleum Exporting Countries, on world oil prices? Extracting the Conference s decisions from the communiqu�s of fifty meetings from 1984-2001, these decisions were compared with the subsequent market developments. The result is that this impact is weak at best, and if at all then restricted to meetings recommending a price increase. However, the opposite claim (found in the literature) - the Conference is simply following the market - was also not supported either. Another interesting observation is the little autocorrelation between the decisions of the Conference. This suggests that the ministers decisions accommodate quickly and efficiently recent events.



Implied Volatility of Oil Futures Options Surrounding OPEC Meetings

Stephen M. Horan, Jeffrey H. Peterson, and James Mahar

Year: 2004
Volume: Volume 25
Number: Number 3
DOI: 10.5547/ISSN0195-6574-EJ-Vol25-No3-6
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Abstract:
This study examines implied volatility from options on crude oil futures surrounding OPEC meetings. Studies suggest that the implied volatility embedded in option prices should drift upward prior to scheduled information releases and drop afterward. As predicted, volatility drifts upward as the meeting approaches and drops by three percent after the first day of the meeting and by five percent over a five-day window period. Surprisingly, highly visible bi-annual conferences experience little drop in volatility. Rather, the most pronounced decline in volatility is associated with meetings of the Ministerial Monitoring Committee, which makes production recommendations to the larger conference. The results have implications for the debate about whether OPEC influences oil prices and provide an explanation for previously documented return anomalies in crude oil futures surrounding OPEC meetings.





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