The Russia-Saudi Arabia oil price war during the COVID-19 pandemic

Highlights: • An event study is used to measure how the price war affected crude oil markets. • The outbreak and truce of the price war have asymmetrical effects on the markets. • Information leakage plays an important role in the impacts of the oil price war. • Impacts are negatively correlated with the futures time-to-maturity. • Market players could perceive and assimilate market changes in the oil price war. The COVID-19 pandemic damaged crude oil markets and amplified the consequences of uncertainty stemming from the Russia-Saudi Arabia oil price war in March-April of 2020. We investigate the impacts of the oil price war on global crude oil markets. By doing so, we use the daily futures and spot prices in three major crude oil markets – West Texas Intermediate, European Brent, and Oman – to perform a systematic analysis of the impacts of the oil price war on them. The event study method, a well-established analytical tool to measure the impacts of a given event on markets, is used in this study. The results indicate that information leakage plays an important role in the impacts of the price war. The outbreak of and truce following the price war have asymmetrical impacts on the markets; negative impacts generated by information leakage during the outbreak are generally more durable than the positive ones it generated during the truce. Furthermore, the magnitude of the impacts on futures markets is negatively correlated with the time-to-maturity of futures. Finally, negative crude oil prices affect West Texas Intermediate crude oil markets the most. Our findings generally show that market participants could perceive and assimilate market changes and adjust their expectations, which restrained the impacts that should have occurred within the oil price war.