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Key Market Trends Affecting Oil Price Fluctuation

Fluctuations in oil prices are common in the energy industry. These are usually driven by the demand-to-production ratio. When there’s an oversupply of oil in the market, prices dip. When demand outweighs production, prices rise.

Recently (October 2021), oil prices have been increasing because demand is outpacing supply. This is a result of oil production slowing during the pandemic. Now, in response to rising demand, OPEC has agreed to increase oil production.

Key fact: The EIA forecast that Brent crude oil prices will average $71.38/b for 2021 and $71.91/b in 2022

Even political instability in the Middle East and higher production costs, such as oil sand extraction, can impact oil prices. Other key market trends that typically affect fluctuating oil prices include economic growth, transportation needs, population growth, and even seasonal changes. All of these factors play a role in boosting oil demand.

For example, in summer months, there is an increase in transportation as people travel for holidays. Meanwhile, during winter, more oil products are needed to warm commercial and residential buildings.

Benefits

  • Decreasing oil prices increase overall economic activity

  • Rising oil prices incentivise people to travel less

  • Lower energy costs increase incomes and consumption


Learn more insights by browsing our resource centre and learn more about digital trends shaping operator responses to the coming hydrocarbon boom and energy transition in the Innovation Forecast in Energy.

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