Effect of inventory announcements on crude oil price volatility

This paper examines the behavior of crude oil futures price volatility and investigates how the EIA weekly crude oil inventory reports announcements, especially information shocks, impact crude oil price movement and volatility. This study focuses on inventory information shocks using a new measure rather than on inventory changes themselves. The empirical results reveal that inventory information shocks rather than actual inventory changes negatively affect crude oil returns on the day the EIA releases the inventory information, although inventory shocks have no effect on daily conditional variance, which mainly follows a GARCH(1,1) process. To test the robustness of our model, we re-estimate the models for three subsamples. According to all results, we find that the effect of inventory shocks is weakened in rapid growth periods and disappears in steep fall markets. •Investigate the effect of EIA inventory reports announcements on crude oil futures price volatility.•Inventory information shocks have a significant negative effect on crude oil returns, especially when the inventory information shocks are negative.•Inventory information shocks shift the daily price level but not affect daily conditional volatility.•The effect of inventory shocks is weakened in rapid growth periods and disappears in steep fall markets.