Title: Reasons behind words: Causes and consequences of OPEC narratives
Authors: Celso Brunetti - Bocconi University and Federal Reserve Board (United States)
Valerie Mignon - Universite Paris Nanterre and CEPII (France)
Marc Joets - IESEG School of Management (France) [presenting]
Abstract: Several studies have documented the effect of OPEC announcements on crude oil prices and volatility with mixed results. They all concentrate on the event study of production or price-related announcements. We propose to reverse the question by asking: what are the factors behind OPEC communications? In other words, what are the exogenous elements that influence the nature of OPEC communications? To answer this question, we propose a completely novel approach using natural language processing. We first model OPEC communications by extracting topics from OPEC press re- leases over the period March 2002-March 2021. This allows us to construct the whole spectrum of OPEC communications over time. Second, we propose a methodology to select major topics that are strictly related to crude oil prices across different maturities. Third, we analyze the causes of OPEC communications among a set of exogenous factors.