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.
Decreasing oil prices increase overall economic activity
Rising oil prices incentivise people to travel less
Lower energy costs increase incomes and consumption
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