Title: COVID-19 and negative oil prices – an empirical analysis comparing importing and exporting countries

Authors: Muhammad Umar; Joaquim António Martins Ferrão; Mário Nuno Mata

Addresses: School of Economics and Management, East China Jiaotong University, Nanchang, Jiangxi, China ' Finance Department, Instituto Politécnico de Lisboa, Instituto Superior de Contabilidade e Administração de Lisboa (ISCAL), Avenida Miguel Bombarda 20, 1069-035 Lisboa, Portugal ' Finance Department, Instituto Politécnico de Lisboa, Instituto Superior de Contabilidade e Administração de Lisboa (ISCAL), Avenida Miguel Bombarda 20, 1069-035 Lisboa, Portugal

Abstract: The coronavirus pandemic has forced lockdown in many countries, reducing the use of vehicles and planes, resulting in a negative oil demand shock. In the USA, West Texas Intermediate (WTI) crude oil FOB spot price was recorded to be negative $36.98 per barrel on April 20, 2020. This would seem to be good news for oil importers and bad news for oil exporters. However, the results of an event study analysis of indices data ranging from July 1, 2019 to May 29, 2020 present a different picture. The incidence of a negative oil price had a negative impact on the stock markets of both major oil importing and exporting countries, although the effects on exporting countries were much more negative. Cumulative average abnormal returns, measured using a historical mean model and in reference to the event day of April 20, were significantly negative for all groups in the first two days, vanishing quickly in the very short term.

Keywords: negative oil price; COVID-19; demand shock; energy markets; oil importing; event study.

DOI: 10.1504/GBER.2023.128847

Global Business and Economics Review, 2023 Vol.28 No.2, pp.218 - 232

Received: 04 Dec 2021
Accepted: 01 Apr 2022
Published online: 07 Feb 2023 *

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