Prediction of crude oil prices in COVID-19 outbreak using real data

Abstract

The world has been undergoing a global economic recession for almost two years because of the health crisis stemming from the outbreak and its effects have still continued so far. Especially, COVID-19 reduced consumer spending due to social isolation, lockdown and travel restrictions in 2020. As a result of this, with social and economic life coming to a standstill, oil prices plummeted. With the ongoing uncertainty concerning the COVID-19 pandemic, it has been of great importance for all economic agents to predict crude oil prices. The objective of this paper is to improve a model in order to make more accurate predictions for crude oil price movements. The performance of this model is assessed in terms of some significant criteria comparing our model with its counterparts as well as artificial neural networks (ANNs) and support vector machine (SVM) methods. As for these criteria, root mean square error (RMSE) and mean absolute error (MAE) results show that this model outperforms other models in forecasting crude oil prices. Further, the simulation results for 2021 show that the daily crude oil price forecasts are almost close to the real oil prices.Oil price forecasting has become more and more important for economic agents in COVID-19 period. A consistent model is required to cope with the movements in crude oil prices. A novel method combining fuzzy time series and the greatest integer function is developed. The results show that our model outperforms other counterparts or ANN and SVM methods. We capture non-linearity and volatility in crude oil prices.