OPEC oil production and market fundamentals: a causality relationship

Authors: Dahmani, Atmane¹; Al-Osaimy, Mahmoud H.²

Source: OPEC Review, Volume 25, Number 4, December 2001 , pp. 315-337(23)

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Abstract:

This paper first establishes a statistical measurement for OPEC Member Countries' compliance levels with their respective quotas and then examines the correlations and the causual relationships between compliance levels and oil market fundamentals. The compliance level is measured by the deviation of the production level from the respective quota for OPEC Member Countries, and this is based on the Euclidean distance formula, while oil market fundamentals are represented by OECD oil demand and stock levels, and the OPEC Basket price and oil supply. Monthly data from January 1996 to June 2000 was used and two sub-periods considered, where the first sub-period was characterized by a low level of compliance and the second by a high level. The analytical results of correlations and causality showed different directions of relationships between compliance levels and oil market fundamentals.

Document Type: Original article

DOI: http://dx.doi.org/10.1111/1468-0076.00102

Affiliations: 1: Statistical Systems Analyst in the Data Services Department, 2: Petroleum Industry Analyst in the Petroleum Market Analysis Department at the OPEC Secretariat in Vienna, Austria.

Publication date: 2001-12-01