Seasonality in crude oil returns

This paper explores the efficiency issue of the oil market in order to test the seasonal behavior of oil price returns, specifically day-of-the-week effect and month-of-the-year effect for the period December 1987 to January 2016. We use a dummy variable regression estimation technique to test seasonal anomalies for the Brent and WTI crude oil returns. Our empirical results find support for the negative Monday effect. The evidence of negative Monday returns is consistent with the relevant empirical literature. Moreover, the returns on Thursday are highest in a week followed by returns on Friday for both oil markets. This study also found evidence on month-of-the-year effect as the negative returns in November and December for Brent and WTI oil markets. Finally, this study is important for energy researchers, market participants, and policy-makers because anomalous oil markets’ behavior implies return predictability and the implementation of profitable investment strategies by market players and may also impact the macroeconomic variables and stock market returns.