Event Study of Oil Market During Negative Prices Shock in 2020

In March 2020, an event occurred that had a wide impact on the global energy market, which led to a negative price in the oil futures market for the first time on the entire observation horizon since the start of the first trading session of oil futures contracts on the NYMEX in 1984. By that time, international markets have seen a steady downtrend associated with the outbreak of the SARS-COVID-19 pandemic in December 2019. The objective of the study is to assess the effect of the so-called “opposite short-squeeze” that occurred in 2020 in conditions with high volatility and global economic recession, caused by pandemic outbreak. Using the example of event analysis of the behavior of prices of two main oil futures contracts traded on the Chicago Mercantile Exchange (CME), namely WTI (Western Texas Intermediate) and Brent (North Sea mark), come to a conclusion about the significance of single event. In our work, we use the classic “Event study” approach described in Fama, Fisher, Jensen, Roll (1969) to assess the effectiveness of an event, using American oil market ETF as a proxy in modelling. After testing the validity of the collected data, we concluded that the effect of the event is evident at the 95% confidence interval.