Explore the Impact of Macroeconomic Indicators on WTI Oil Prices

Abstract

This research paper explores the relationships between West Texas Intermediate (WTI) oil prices and various macroeconomic indicators. Given the significant role of WTI prices in shaping global economic activities, understanding their volatile dynamics is crucial for numerous industries. Predicting these prices, however, poses significant challenges due to the complex nature of the oil market, influenced by myriad factors such as geopolitical developments, supply-demand imbalances, and diverse macroeconomic parameters. The research addresses this issue by developing a predictive model for WTI oil prices, deploying an Autoregressive Integrated Moving Average (ARIMA) model. The study has a selection of macroeconomic variables that accurately reflect the global economy's various aspects influencing WTI prices. These include the NASDAQ index, the US Dollar Index (DXY), the Economic Uncertainty Index, the 5-Year Inflation Break Even, the US 3-Month Treasury, the 10Y Less 2Y, the US Oil Demand, and the difference between oil Demand and Supply. This research aims to deepen our understanding of the multifaceted relationship between WTI oil prices and these critical macroeconomic indicators. In doing so, this study offers substantial academic contributions to comprehending oil price dynamics. Additionally, it provides valueable insights for industry stakeholders, financial analysts, policymakers, and investors, enhancing economic planning and risk management across sectors.