The linkage between the epidemic of COVID-19 and oil prices: case of Saudi Arabia, January 22 to April 17

The prevalence of coronavirus disease 2019 (COVID-19) exacerbated investor fears, uncertainties, and increased volatility in financial markets. The reaction to oil prices gradually absorbed the epidemic until March 08, but the market situation changed soon with a sharp drop in prices until April 17. This study aims to verify the impact of COVID-19 cases on crude oil prices and the Saudi economy. A simple linear regression estimate shows that new daily outbreaks have a marginally negative impact on crude oil prices in the short term. However, COVID-19 also has an indirect effect on the recent volatility in crude oil prices. Solutions include proactive management, and we emphasize that special consideration must be given to the size of the supply to properly forecast oil prices. Volatility dominates in the short term. The relationship between the epidemic and oil prices reveals a root cause. Moreover, we investigate the interaction between the epidemic and oil prices, with the effective implementation of these solutions with the government's full support.