Crude Oil Price Determinants and the Impact Of COVID-19 on Crude Oil Price

Abstract

Causes of oil price increase have been a subject of much interest and numerous studies given the importance of oil as the main source of energy of the world. In the last two decades, the price volatility of crude oil has always remained a controversy. Literature has two views. The first view argues that the changes in oil prices are due to supply and demand. The other claims that financial variables (speculation and futures markets) are vital in crude oil price changes. The advent of new variables that serve as paradigm for oil price volatility creates the need to understand the intricacies of the oil market. This paper investigated the factors that determine the prices of crude oil together with the degree to which prices have been affected by the global health pandemic the Corona Virus Disease (COVID-19) in 2020 by employing a multiple regression method in its assessment. With oil price as the dependent variable, all other variables were analyzed to assess the dependency of the crude oil prices on these independent variables. Refinery capacity, Organization of Petroleum Exporting Countries (OPEC) production and oil trade movements were found to be the main affecting factors in this work whilst the cases and deaths arising from the COVID-19 confirmed cases and recorded deaths in the year 2020 proved insignificant as a determining crude oil factor