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What Influences the Price of Oil?

Date Modified: 26/07/2023

From extraction to consumption, Oil is the basis for many common products, offering traders ample opportunities to speculate on the commodity and the companies which rely on it.

Crude Oil (CL), which is priced per barrel, can be used in a variety of ways. It powers our homes as heating oil, enables transportation as Gasoline, and even is the base of the plastics which house key components in our favourite gadgets. So it’s no surprise that traders recognize both the short-term and long term value of trading on this ‘liquid-gold’ as our world becomes ever more dependent on the products it enables.

Word cloud with oil trading terms.

Influences on Oil’s price

There are various influences on the price of Oil which at times have brought times of great volatility. An example of this is in 2008 when Oil hit a high of $166 per barrel and another is how it hit an all time low in 2020 when it traded in the negatives.

Supply & Demand

Unlike Gold (XAU) or other precious metals, Oil is a consumable product. It’s usefulness is expelled with each use, meaning that once it is consumed, more Oil must be used to replace it. Its uses include plastics that range from thin films to military-grade parts, as well as a combustible fuel for locomotives, cars, buses, airplanes, and more.

Its seemingly endless uses in our modern world have created very high demand around the globe for this finite commodity.

Energy companies are racing to provide a continuous supply of ‘liquid-gold’ by extracting 95.2 million barrels of Oil per day around the globe in 2019. These include Crude Oil, Shale Oil, Oil Sands, and Natural Gas Oils. Since the widespread implementation of fracking in 2006, the US has become a rising energy producer, reaching 12.2 million barrels of oil per day in 2019.

Although decades-long trends show an increase in the consumption of Oil, there are various factors that may reduce demand, having major consequences for traders, such as the September 11 terror attacks in 2001 and the Coronavirus pandemic in 2020. These major events led to a significant decline in air travel, grounding flights and leaving fuel unused. This created an unexpectedly high volume of supply, sowing uncertainty into the oil markets.

Geopolitical Events

While the cost of producing and shipping oil may remain relatively stable, geopolitical events have the potential to create volatility in the Oil market. As manufacturers and traders rush to lock in rates, prices may fluctuate, rising and falling with global events.

An example of this can be a military conflict in the Middle East, where a majority of the world’s oil is extracted, or a shift in political alliances that threaten to reduce the flow of this vital commodity.


The Organization of Petroleum Exporting Countries (OPEC) is made up of Algeria, Angola, Congo, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Saudi Arabia, United Arab Emirates, & Venezuela. Founded in 1960, OPEC reports oil production per member country and collectively manages the amount of oil being produced. This ensures that their supply does not outpace demand.

Not included in this group are Russia and the United States who have become major energy producers over the last few decades and compete with OPEC for market share.

Oil drilling machines.

Trading sentiment

Trader sentiment can shift the price of Oil by influencing the availability of traded futures.

If there is a major increase of traders purchasing Oil Futures contracts, it may alert other traders of a sudden price movement, triggering a further increase in trader volume and raising the commodity’s price. On the other hand, if there is a lack of buyers in the market, or one of the above influences cause the market to believe that their contracts may become devalued, it may lower the value of an Oil contract.

Oil as a Volatile Commodity

Oil, as discussed above, is vulnerable to market fluctuations and trader sentiments. This volatility keeps it a continuous favourite amongst traders but also brings with it its own risks.

A military flare-up, new OPEC output guidelines, or various other global events can send the price soaring or plummeting unexpectedly. This continuous movement can be profitable but comes with risks, meaning that traders should stay alert to market movements when opening buy or sell positions on this exciting commodity.

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Crude oil, also known as North American crude oil, is the underlying instrument for trading oil extracted from US land and coastal waters. Its biggest counterpart is Brent Oil – a benchmark for North Sea crude oil.

Oil CFD is a financial derivative which follows price changes in Crude oil futures, the world’s largest and most traded commodity. Oil futures CFDs are traded on Plus500’s trading app 23 hours a day, 5 days a week, based on price quotes provided by the New York Mercantile Exchange – a leading commodity futures market which is part of the Chicago Mercantile Exchange (CME).

The factors affecting crude oil prices are generally divided into three groups:

  • Macroeconomic factors
    • Supply: includes raw oil resources that can be physically extracted from land or sea, and oil reserves which consist of a daily, weekly or monthly amount of oil barrels that can be produced at a price that is financially beneficial.
    • Demand: reliance on oil supplies and by-products for maintaining growth in global economy, and the adoption of alternative energy sources such as wind, hydro-electric and solar energy.
  • Relations between major players in oil markets
    • Production agreements between leading producers of petroleum concerning how much oil to produce.
    • Political or economic sanctions imposed on (or lifted from) oil-exporting countries such as Iran, Venezuela, Qatar or Russia can result in fluctuations in global oil prices, along with the prices of other commodities.
  • Speculations and trading sentiment
    • Trading oil through futures contracts is considered a common form of trading. Due to the large number of market speculators – central banks, investment banks, financial institutions, brokerage firms, individual investors, day traders, etc. – this activity has the ability to strengthen or reverse the momentum in oil prices.

Explore more factors that can affect Oil prices in our "What Influences the Price of Oil" article.

Benefits of using the Plus500 app to trade oil futures CFDs include:

  • Competitive spreads with zero trading commissions.
  • Access to high levels of liquidity and volatility due to the nature and popularity of oil.
  • The oil market is open for trading 23 hours a day, 5 days a week.
  • Free-of-charge automatic rollover from old to new contracts.
  • You can trade in any direction – Selling is just as accessible as Buying.
  • Our customer support team is here for you 24/7.

There are a number of different types of crude oil, with different pricing characteristics. The two leading international crude oil prices are:

NYMEX WTI Crude Oil – determined according to a benchmark in oil futures contracts as traded on CME’s New York Mercantile Exchange.

Brent Oil – determined according to an international benchmark used primarily in Europe, and traded on the Intercontinental Exchange (ICE).

Another important oil pricing benchmark is the OPEC Basket which includes an aggregate for oil produced and exported by the countries of the Organization of Petroleum Exporting Countries, with Saudi Arabia being its chief member.

Follow these 7 steps in order to trade oil CFDs with Plus500:

  1. If you don’t already have a Plus500 trading account, click here.
  2. Register your details and deposit funds via bank transfer, debit card and more.
  3. Navigate to oil under ‘Commodities’ or search for ‘Oil’ in the search bar.
  4. Check for upcoming economic events that have an effect on oil prices, such as the US weekly petroleum status report and OPEC meetings.
  5. Manage your risk and profit by adding stop orders such as 'Close at Loss' and 'Close at Profit'.
  6. Open a Buy or Sell position according to the direction you expect oil to move.
  7. When you want to close out your position, click on the ‘Close’ button.

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