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Effect of inventory announcements on crude oil price volatility

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  • Bu, Hui

Abstract

This paper examines the behavior of crude oil futures price volatility and investigates how the EIA weekly crude oil inventory reports announcements, especially information shocks, impact crude oil price movement and volatility. This study focuses on inventory information shocks using a new measure rather than on inventory changes themselves. The empirical results reveal that inventory information shocks rather than actual inventory changes negatively affect crude oil returns on the day the EIA releases the inventory information, although inventory shocks have no effect on daily conditional variance, which mainly follows a GARCH(1,1) process. To test the robustness of our model, we re-estimate the models for three subsamples. According to all results, we find that the effect of inventory shocks is weakened in rapid growth periods and disappears in steep fall markets.

Suggested Citation

  • Bu, Hui, 2014. "Effect of inventory announcements on crude oil price volatility," Energy Economics, Elsevier, vol. 46(C), pages 485-494.
    • Handle: RePEc:eee:eneeco:v:46:y:2014:i:c:p:485-494
    DOI: 10.1016/j.eneco.2014.05.015
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    More about this item

    Keywords

    Inventory information shocks; Futures price; Price volatility;
    All these keywords.

    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General

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