1. Global economic conditions: Economic growth or recession can significantly impact oil demand. During economic expansion, increased industrial activity and transportation lead to higher oil consumption, driving prices up. Conversely, economic downturns can reduce demand and lower prices.
2. Geopolitical events: Political instability, conflicts, or sanctions in oil-producing regions can disrupt supply and increase prices. Conversely, political agreements or diplomatic resolutions can stabilize or reduce prices.
3. OPEC and non-OPEC cooperation: The Organization of the Petroleum Exporting Countries (OPEC) and other major oil-producing nations often collaborate to manage production levels and influence oil prices. Agreements like the OPEC+ deal can help stabilize prices by coordinating supply adjustments.
4. Inventory levels: Changes in oil inventories, particularly in the United States, can impact prices. Rising inventories may indicate increased supply, potentially lowering prices, while declining inventories suggest reduced supply, which can drive prices up.
5. Currency fluctuations: The value of currencies, particularly the US dollar, can affect oil prices. A stronger US dollar can make oil more expensive for foreign buyers, leading to higher prices, while a weaker dollar can have the opposite effect.
6. Technological advancements: Innovations in oil extraction, such as fracking and horizontal drilling, can increase supply and lower prices. Conversely, technological setbacks or regulatory changes can reduce supply and increase prices.