Price forecasting through neural networks for crude oil, heating oil, and natural gas

Abstract

Building price projections of various energy commodities has long been an important endeavor for a wide range of participants in the energy market. We study the forecast problem in this paper by concentrating on four significant energy commodities. Using nonlinear autoregressive neural network models, we investigate the daily prices of WTI and Brent crude oil as well as the monthly prices of Henry Hub natural gas and New York Harbor No. 2 heating oil. We investigate prediction performance resulting from various model configurations, including training techniques, hidden neurons, delays, and data segmentation. Based on the investigation, relatively straightforward models are built that yield quite accurate and reliable performance. Specifically, performance in terms of relative root mean square errors is 1.96%/1.81%/9.75%/21.76%, 1.96%/1.80%/8.76%/14.41%, and 1.87%/1.78%/9.10%/16.97% for model training, validation, and testing, respectively, and the overall relative root mean square error is 1.95%/1.80%/9.51%/20.35% for the whole sample for WTI crude oil/Brent crude oil/New York Harbor No. 2 heating oil/Henry Hub natural gas. The outcomes of this projection might be used in technical analysis or integrated with other fundamental forecasts for policy analysis.