What Influences the Oil Market Price
Oil prices change daily and are determined by traders who bid on oil futures contracts. This contract is an agreement that gives traders the right to purchase oil at a set price based on the projection made. Both the buyer and seller set delivery date in the future at the set price.
There are several factors that traders consider :
- Oil Demand: Estimates are provided by the Energy Information Agency; seasonal considerations are taken into account. As demand increases the price should go up.
- Current Supply: OPEC supply and the US shale oil production are analyzed. As supply increases the price should go down.
- Access to future supply: This depends on oil reserves in the US refineries, and the world. These reserves can be retrieved easily if prices get too high.
- World Crisis: A potential crisis could increase oil process since traders worry a war or famine for example could limit the overall supply.
- Man-made disasters and natural disasters such as hurricanes, floods, and oil spills can all influence the price of oil and the world supply of oil inventory.
- Currency strength: Most Energy products are priced in USD, and thus it would be wise to monitor the dollar index in order to better forecast the price dynamics.
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