Energy Market: Assessment of Global and Local Market Volatility Amid the COVID-19 Pandemic

• Published in: Smart grids and sustainable energy 2023-07, Vol.8 (3), p.13, Article 13
• Main Authors: Hajiyev, Nazim Ozbey, Abdullayeva, Esmira Janali, Musayeva, Jamila Gazanfar, Istomina, Anna, Vityutina, Tatyana
• Format: Article
• Language: English
• Subjects: Australian coal; Coal; Coronaviruses; Cost analysis; COVID-19; Crude oil; Energy resources; Energy sources; Futures; Global marketing; International finance; Mathematical analysis; Natural gas; Oils & fats; Pandemics; Prices; Securities markets; Statistical analysis; Stock exchanges; Volatility
• ISSN: 2731-8087; 2731-8087; 2199-4706
• DOI: 10.1007/s40866-023-00170-5

The study aimed to determine the relationship between the volatility of the international and national financial markets under the influence of the coronavirus (COVID-19) pandemic. During the study, it was found that the economic consequences of the pandemic strongly influence the price of futures for coal and natural gas in the global and Russian financial markets but do not have a statistically significant impact on oil prices. It was established that the price of West Texas International oil (WTI) in the world market and the pandemic factor influence the value of the Russian Trading System (RTS) index and its volatility. Meanwhile, the volatility and value of the Moscow Exchange stock (IMOEX) index are strongly influenced by the futures prices for Brent and Dubai oils, coal from Australia and South Africa, and natural gas from Europe in the world market, as well as the COVID-19 pandemic. Such differences in the influence factors are because the calculation of the Moscow Exchange index is provided in Russian rubles. As a result, the devaluation of the latter affects the index value and volatility. The Russian Trading System index is calculated in U.S. dollars, which eliminates the impact of changes in the exchange rate. The methodological limitation is that only two Russian financial exchanges were considered in the study. The study's implementation limitation is that its findings can be applied to financial exchanges that are not subject to sanctions or restrictions on access to international financial exchanges. The novelty of the study lies in the multifactorial approach applied to assess the impact of volatility on energy resources in global and local financial markets during a pandemic. Based on the quantitatively study, Russia’s stock indexes are in a direct strong relationship with the cost of natural gas in the global market. The analysis of volatility indices in individual stock markets in Russia also found a strong effect of oil futures: for instance, WTI oil futures prices in the global market affect the volatility of RTS indices, whereas the futures prices for Brent and Dubai oils, Australian coal, South African coal, and European natural gas in the global market affect the volatility of the IMOEX index. The proposed approach allows predicting the dynamics of Russia’s stock indices depending on price volatility in the global market.