Forecasting OPEC Crude Oil Price Using Fuzzy Autoregressive Integrated Moving Average (FARIMA) Model

Abstract

Crude oil prices are influenced by many factors. Inclusion of all these determinants in a single model is complex and inefficient. In this case, using time series approach might be appropriate. In the later method past behavior of oil prices is used to forecast its future volatility. Several time series studies were conducted to forecast oil prices using methods such as autoregressive integrated moving average (ARIMA) models and artificial neural networks (ANN). All these methods need a large volume of data to have accurate forecasting. One way to overcome this limitation is to use fuzzy regression (FA) models which can give more accurate forecasting with less data. In this study, the three methods, fuzzy regression, ARIMA and fuzzy autoregressive integrated moving average (FARIMA) were applied using the daily oil price in order to forecast oil prices. To compare the forecast accuracy of the model, the prediction error criteria was used. The results showed that the performance of FARIMA is much better than the other two models.

Keywords

• oil price forecasting; ARIMA; Fuzzy Regression; FARIMA; OPEC