Inventory information arrival and the crude oil futures market
Corresponding Author
Tarek Chebbi
Oman College of Management and Technology, Dept. of Administrative and Financial Sciences, Barka, Sultanate of Oman
Correspondence
Tarek Chebbi, Oman College of Management and Technology, Department of Administrative and Financial Sciences, 320, Barka, Sultanate of Oman.
Email: [email protected]
Search for more papers by this authorWaleed Hmedat
Oman College of Management and Technology, Dept. of Administrative and Financial Sciences, Barka, Sultanate of Oman
Yarmouk University, Irbid, Jordan
Search for more papers by this authorCorresponding Author
Tarek Chebbi
Oman College of Management and Technology, Dept. of Administrative and Financial Sciences, Barka, Sultanate of Oman
Correspondence
Tarek Chebbi, Oman College of Management and Technology, Department of Administrative and Financial Sciences, 320, Barka, Sultanate of Oman.
Email: [email protected]
Search for more papers by this authorWaleed Hmedat
Oman College of Management and Technology, Dept. of Administrative and Financial Sciences, Barka, Sultanate of Oman
Yarmouk University, Irbid, Jordan
Search for more papers by this authorAbstract
The objective of this paper is to provide a deeper insight into the impact of weekly inventory announcements and especially their associated surprises on crude oil returns and volatility during the period from 27 March 2012 to 2 October 2018. The results can be summarized as follows. First, we find that all inventory surprises exert an inverse impact on the oil price returns. Such impact appears more pronounced during the collapse and post-collapse periods, than during the pre-collapse period. Second, we show that the reducing volatility effects of inventory shocks that we establish for the whole period are entirely attributed to those observed in the pre-collapse period. Third, the different effects obtained for positive and negative shocks support evidence that our split of inventory news by nature matters. Fourth, compared to macroeconomic and unconventional monetary news, the inventory statements appear as the most pertinent news during the event window. Fifth, we find evidence also that the effect of the uncertainty about economic stance, when it is significant, changes the way the oil prices and volatility react to inventory surprises, and hence weakens the effectiveness of the inventory policy. Lastly, we make an original use of the information content of the implied volatility to assess the persistence of the link between the conditional variance and the inventory news. The central finding is that the implied volatility enters with a significant effect on the conditional variance for WTI oil returns and namely with a reduced volatility persistence. Also, a significant effect from inventory surprises namely when we split the announcements into negative and positive news is detected even the implied volatility is introduced exogenously in the GARCH-type variance specification highlighting the predominance of our main variable.
CONFLICT OF INTEREST
The authors have declared no conflict of interest.
Open Research
DATA AVAILABILITY STATEMENT
The findings of this paper are based on the following resources available in the public domain: Data for API's oil inventory changes and their forecasts were derived from http://www.investing.com; LSAP monetary announcements were obtained from the Fed's website; Data for macroeconomic surprises were downloaded from https://sites.google.com/site/chiarascottifrb/research?authuser=0; Data for policy uncertainty were obtained from https://www.policyuncertainty.com/; Data for crude oil OVX were sourced from the Federal Reserve Bank at Saint Louis (https://fred.stlouisfed.org/).
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