Energy Markets and Global Economic Conditions

We evaluate alternative indicators of global economic activity and other market fundamentals in terms of their usefulness for forecasting real oil prices and global petroleum consumption. World industrial production is one of the most useful indicators. However, by combining measures from several different sources, we can do even better. Our analysis results in a new index of global economic conditions and measures for assessing future energy demand and oil price pressures. We illustrate their usefulness for quantifying the main factors behind the severe contraction of the global economy and the price risks faced by shale oil producers in early 2020.

Automated summary

We evaluated alternative indicators of global economic activity and other market fundamentals for forecasting real oil prices and global petroleum consumption. World industrial production emerged as the most useful indicator, but combining measures from different sources can yield better results. Our analysis led to the development of a new index for global economic conditions and measures for assessing future energy demand and oil price pressures. We demonstrated their usefulness in quantifying the main factors behind the global economic contraction and the price risks faced by shale oil producers in early 2020.