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Role of the Coronavirus Pandemic and the Collapse of the OPEC+ Deal in the Dynamics of Oil Prices in 2020

Daniil A. Lomonosov – Junior Researcher of the Russian Presidential Academy of National Economy and Public Administration (Moscow, Russia). E-mail: This email address is being protected from spambots. You need JavaScript enabled to view it.

In 2020, world oil prices were subjected to notable shocks, which are primarily associated with two events – the failure of the OPEC+ deal and the coronavirus pandemic. Based on the BVAR model of the oil market, the article assesses the quantitative role of these events in the oil prices dynamic, and also identifies the channels of their influence through structural shocks. It is revealed that the expectations of economic agents played a dominant role in the fall in oil prices in H1 2020, while the direct contribution of the decline in business activity during this period was more modest. The main factor of price growth in H2 2020 is there has been a significant reduction in global oil output.

The article was prepared as part of the state research order of the RANEPA.

Key words: oil prices, pandemic, OPEC+, global economic activity shock, oil supply shock, specific oil demand shock.

JEL-codes: C32, E32, Q43.