عربي English Türkçe اردو فارسى
Logo
Latest News
Business

Federal Reserve System Study: OPEC Decisions Ensure Oil Markets’ Stability

A model of an oil rig with the OPEC logo in the background. (Reuters)
A model of an oil rig with the OPEC logo in the background. (Reuters)
TT
TT

Federal Reserve System Study: OPEC Decisions Ensure Oil Markets’ Stability

A model of an oil rig with the OPEC logo in the background. (Reuters)
A model of an oil rig with the OPEC logo in the background. (Reuters)

A recent study of the Board of Governors of the Federal Reserve System has concluded that OPEC’s credible decisions and research ensure the oil markets’ stability.
“We find that OPEC communication reduces oil price volatility and prompts market participants to rebalance their positions,” according to the study published on the Banks’ website.
“Our analysis indicates that market participants assess OPEC communications as providing an important signal to the crude oil market,” the study added.
“We analyze the content of the Organization of the Petroleum Exporting Countries (OPEC) communications and whether it provides information to the crude oil market. To this end, we derive an empirical strategy which allows us to measure OPEC’s public signal and test whether market participants find it credible.”
“Using Structural Topic Models, we analyze OPEC narratives and identify several topics related to fundamental factors, such as demand, supply, and speculative activity in the crude oil market,” it added.
“OPEC’s objective is ‘[...] to coordinate and unify the petroleum policies of its Member Countries and ensure the stabilization of oil markets [...]’. A well-functioning crude oil market may have positive implications for the economy and inflation.”
OPEC on Tuesday stuck to its forecast for relatively strong growth in global oil demand in 2024 and 2025 and raised its economic growth forecasts for both years saying there was further upside potential.

In a monthly report, it said world oil demand will rise by 2.25 million barrels per day (bpd) in 2024 and by 1.85 million bpd in 2025. Both forecasts were unchanged from last month.
A further boost to economic growth could give additional tailwind to oil demand. OPEC's 2024 demand growth forecast is already higher than that of other forecasters such as the International Energy Agency, although the wider OPEC+ alliance is still cutting output to support the market.
OPEC said a "positive trend" for economic growth was expected to extend into the first half of 2024 and raised its economic growth forecasts for 2024 and 2025 by 0.1 percentage points.
OPEC and the wider OPEC+ alliance have implemented a series of output cuts since late 2022 to support the market. A new cut for the first quarter took effect last month.

 

 

Most Viewed

 
 
Business

US Economy Grows at 3.1% Pace in 3rd Quarter, an Upgrade from Previous Estimate

FILE PHOTO: A sailboat passes by the Statue of Liberty in New York Harbor, in New York City, US, September 20, 2024. REUTERS/Brendan McDermid/File Photo
FILE PHOTO: A sailboat passes by the Statue of Liberty in New York Harbor, in New York City, US, September 20, 2024. REUTERS/Brendan McDermid/File Photo
TT
TT

US Economy Grows at 3.1% Pace in 3rd Quarter, an Upgrade from Previous Estimate

FILE PHOTO: A sailboat passes by the Statue of Liberty in New York Harbor, in New York City, US, September 20, 2024. REUTERS/Brendan McDermid/File Photo
FILE PHOTO: A sailboat passes by the Statue of Liberty in New York Harbor, in New York City, US, September 20, 2024. REUTERS/Brendan McDermid/File Photo

The American economy grew at a healthy 3.1% annual clip from July through September, propelled by vigorous consumer spending and an uptick in exports, the government said in an upgrade to its previous estimate.
Third-quarter growth in US gross domestic product — the economy's output of goods and services — accelerated from the April-July rate of 3% and continued to look sturdy despite high interest rates, the Commerce Department said Thursday. GDP growth has now topped 2% in eight of the last nine quarters.
Consumer spending, which accounts for about two-thirds of US economic activity, expanded at a 3.7% pace, fastest since the first quarter of 2023 and an uptick from Commerce’s previous third-quarter estimate of 3.5%, The Associated Press reported.
Exports climbed 9.6%. Business investment grew a lackluster 0.8%, but investment in equipment expanded 10.8%. Spending and investment by the federal government jumped 8.9%, including a 13.9% surge in defense spending.
American voters were unimpressed by the steady growth under Democratic President Joe Biden. Exasperated by prices that remain 20% higher than they were when an inflationary surge began in early 2021, they chose last month to send Donald Trump back to the White House with Republican majorities in the House and Senate.
Trump will inherit an economy that looks healthy overall. The unemployment rate remains low at 4.2% even though it is up from the 53-year low 3.4% reached in April 2023. Inflation hit a four-decade high 9.1% in mid-2002. Eleven interest rate hikes by the Federal Reserve in 2022 and 2023 helped bring it down — to 2.7% last month. That is above the Fed's 2% target. But the central bank still felt comfortable enough with the progress against inflation to cut its benchmark rate Wednesday for the third time this year.
Within the GDP data, a category that measures the economy’s underlying strength rose at a solid 3.4% annual rate from July through September, an upgrade from the previous estimate and up from 2.7% in the April-June quarter. This category includes consumer spending and private investment but excludes volatile items like exports, inventories and government spending.
Wednesday’s report also contained some encouraging news on inflation. The Federal Reserve’s favored inflation gauge — called the personal consumption expenditures index, or PCE — rose at just a 1.5% annual pace last quarter, down from 2.5% in the second quarter. Excluding volatile food and energy prices, so-called core PCE inflation was 2.2%, up modestly from the previous estimate but down from 2.8% in the April-June quarter.
Thursday's report was the Commerce Department's third and final look at third-quarter GDP. It will publish its initial estimate of October-December growth on Jan. 30.