Real-time Forecast Combinations for the Oil Price

Baumeister and Kilian (2015) combine forecasts from six empirical models to predict real
oil prices. In this paper, we broadly reproduce their main economic findings, employing
their preferred measures of the real oil price and similar real-time variables. Mindful of
the importance of Brent crude oil as a global price benchmark, we extend consideration
to the North Sea based measure and update the evaluation sample to 2017:12. We
model the oil price futures curve using a factor-based Nelson-Siegel specification to fill in
missing values of oil price futures in the source data. We find that the combined
forecasts for Brent are as effective as for other oil price measures. The extended sample
using the oil price measures adopted by Baumeister and Kilian (2015) yields similar
results to those reported in their paper. And the futures-based model improves forecast
accuracy at longer horizon forecasts. The real-time data set is available for download
from shaunvahey.com.