The price of crude oil fluctuates according to different pressures in the marketplace, and investors try to predict which way current trends are heading. In order to make useful predictions, investors need to understand the variety of factors that can push the price of oil up or down. At the beginning of 2017, the oil market is shaped by its major players in both production and consumption, along with competition from the natural gas industry.
First of all, some of the major oil-producing nations are in financial crisis and thus putting pressure on OPEC to raise the price of oil. Venezuela, for example, is suffering food shortages, while Nigeria and Libya are both experiencing violent internal conflicts. These countries are dependent on revenue from oil to support their national budgets, so they are advocating for higher and higher prices.
Saudi Arabia, on the other hand, has pushed to increase production and keep oil prices below $40 a barrel. Some have theorized that the Saudi government’s intention was to maintain its domination of the market and outpace U.S. fracking operations, while others have suggested that the move is designed to damage the Russian economy. Saudi Arabia’s stance created some tension within OPEC, but they have recently agreed to lower production and let oil prices rise.
The U.S. and China are not only oil producers, but they are also two of the largest oil consumers who import a large percentage of crude oil from other nations. As demand rises, so do prices, and China’s demand for oil, in particular, is on the increase as its economy grows.
Another factor influencing the price of oil these days in the natural gas industry. While oil is primarily used for transportation, gas is being used in a greater variety of ways, and it is taking over some of the functions of crude. For example, some heavy equipment now utilizes natural gas as a transportation fuel.
Expert investors weigh these different factors in order to make predictions about the direction of oil prices. For some up-to-date advice on the best energy investments in 2017, click resources to read an in-depth analysis of the current oil market.