What moves oil

Oil prices are driven by the balance between supply and demand. On the supply side, decisions by producer groups such as OPEC+ and changes in inventories matter most; on the demand side, global economic growth is key, and geopolitical events can shake both at once.

Supply decisions by producer groups

OPEC, the Organization of the Petroleum Exporting Countries, coordinates output among its members. OPEC+ is a wider alliance that includes OPEC and several other large producers. When the group agrees to cut production, less oil reaches the market and prices tend to rise. When it raises output, prices tend to fall. Meetings and even rumours about them can move prices sharply, because markets try to anticipate the outcome.

Inventory reports

Inventories are stocks of crude oil and fuels held in storage. Rising stocks can signal that supply is outpacing demand, while falling stocks suggest the opposite. In the US, weekly inventory data are published by an industry group and by the Energy Information Administration, a government agency. Traders compare each figure with what was expected.

Global demand

Oil fuels transport, industry and power generation, so demand tracks economic activity. Strong growth in large economies tends to support prices, while signs of slowdown, such as weak manufacturing data, can weigh on them. Seasonal patterns, like higher fuel use during summer driving months in some regions, also play a part.

Geopolitics

Much of the world's oil comes from regions that have experienced conflict or political tension. Threats to production facilities or shipping routes, sanctions on exporting countries and political unrest can all raise fears of supply disruption, pushing prices up. When tensions ease, those gains can reverse just as fast.

Other influences

• The US dollar: oil is priced in dollars, so a stronger dollar can make it more expensive for other buyers.
• Production from non-group countries, which can offset producer group cuts.

Key takeaways

• Producer groups such as OPEC+ influence supply through output decisions.
• Inventory reports move prices when they differ from expectations.
• Global economic growth drives oil demand.
• Geopolitical events can cause sharp, fast moves in either direction.