Abstract
Crude oil prices (COP) profoundly influence global economic stability, with fluctuations reverberating across various sectors. Accurate forecasting of COP is indispensable for governments, policymakers, and stakeholders to make well-informed decisions and effectively mitigate risks. The decomposition-based hybrid models have been showing promising COP forecasting accuracy than other time series forecasting methods. Despite this fact, no systematic study has been conducted to evaluate the true potential of different decomposition-based hybrid methods employing different forecasting models to forecast the COP. Therefore, a hybrid modeling framework is developed by combining efficient decomposition techniques, namely empirical mode decomposition (EMD), ensemble EMD (EEMD), complete EEMD with adaptive noise (CEEMDAN), and variational mode decomposition (VMD) with seven statistical models, fourteen machine learning (ML) models, and six deep learning (DL) models. Further, a systematic study is conducted on the resulting decomposition-based hybrid models to find the best hybrid model for COP forecasting. Three distinct train-test data splits are employed to ensure a reliable evaluation of the models using four performance metrics. Extensive statistical analysis is conducted to identify the optimal combination of the decomposition technique and forecasting model for precise COP prediction. The results demonstrate that the proposed decomposition-based hybrid model employing VMD and Huber Regression is statistically the best method among all alternatives to forecast monthly COP. The proposed hybrid method VMD-Huber Regression improves the root mean square error (RMSE) by 21% than CEEMDAN-ARIMA, 58.31% than EEMD-Theta, 13.18% than EMD-Random Walk, and 49.44% than VMD-TBATS hybrid methods in 60–40 Train-Test split ratio.
