The Application of EEMD and Neural Network Based on Polak-Ribiére Conjugate Gradient Algorithm for Crude Oil Prices Forecasting

University of Trunojoyo Madura, Indonesia

E-mail : latif.utm@gmail.com

Abstract

Forecasting crude oil prices is very difficult to do because it has nonlinear and nonstationary characteristics. This research proposes a crude oil prices forecasting using a combination of EEMD and neural network. EEMD was used to decompose the price of crude oil into several IMFs and one residue. Before the training and testing was processed using FNN, EEMD output is normalized to fulfill network activation function. Data pattern of neural network was determined based on the results of normalization. The Learning method of neural network was based on Polak-Ribiére Conjugate Gradient algorithm. The output of neural networks on each component IMFs and the residue was aggregated using Adaline. The last process is denormalization of the Adaline output. Output of denormalization is the end result of the crude oil price forecasting. After forecasting results has been known, it then compared with the results of several neural networks learning algorithm. The result shows that the proposed method has better forecasting ability. This is indicated by the error value which was smaller than other forecasting algorithms for crude oil price forecasting.