Abstract
The aim of this paper is to explore the reasons of oil price volatility. It analyses the information function of oil future market and investigates the relation between speculation and spot oil price in the short run. Furthermore, the paper constructs a model for long run equilibrium able to produce reliable and reasonable oil price forecasts. Findings prove that in the short run, changes in oil inventories Granger cause changes in oil price. In the long run however, findings prove that, the oil demand, the oil supply, the $/SDR exchange rate, the speculation in oil future market (New York Mercantile Exchange) and the oil inventories are associated in a long run relationship.
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