Federal Reserve Study: OPEC Decisions Help Stabilize Oil Markets

(CTN News) – OPEC’s credible decisions and research ensure oil market stability, according to a recent study conducted by the Board of Governors of the Federal Reserve System.

A study published on the Banks’ website found that communication reduces oil price volatility and encourages market participants to rebalance their positions.

“Our analysis indicates that market participants view communications as a valuable source of information for the crude oil market,” the study concluded.
“We examined the content of the communications of the Organization of

The Petroleum Exporting Countries (OPEC) and whether the information is useful to the crude oil market. Thus, we develop an empirical strategy which allows us to measure public signal and test whether market participants regard it as credible.”

The report notes that “We use structural topic models to analyze OPEC narratives and identify several topics related to fundamental factors in the crude oil market, such as demand, supply, and speculative activity.”

The aim of OPEC is to coordinate and unify petroleum policies among its Member Countries and to ensure the stability of the oil market. It has been suggested that a well-functioning crude oil market may have positive impacts on the economy and inflation.”

OPEC on Tuesday reiterated its forecast for relatively strong growth in global oil demand in 2024 and 2025 and raised its economic growth forecasts for both years.

It is estimated that world oil demand will increase by 2.25 million barrels per day (bpd) in 2024 and by 1.85 million barrels per day (bpd) in 2025, according to the company’s monthly report.

In both cases, the forecasts remained the same as last month.
Oil demand may be further boosted if economic growth continues to increase. Even though the alliance is still cutting output in order to support the market,

OPEC’s 2024 forecast is already higher than that of other forecasters such as the International Energy Agency.

Due to an anticipated “positive trend” in growth, the Organization of the Petroleum Exporting Countries (OPEC) has increased its growth forecasts for 2024 and 2025 by 0.1 percentage points.

To support the market, OPEC and the broader OPEC+ alliance have implemented a series of output cuts since late 2022. The first quarter’s cut took effect last month.

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