Why Oil Prices Change and How to Monitor Them

Posted by Zak Goldberg


Like just about any other commodity, the price of oil changes quite often, usually by the minute or even by the second. There are so many reasons why they happen, but what are they? From environmental factors to issues concerning trade balances and government stability, there are several causes to look out for, particularly if you have a keen interest in the oil markets. 

The first is production levels. If major oil-producing nations such as Saudi Arabia, Iran and Venezuela produce fewer barrels of oil than usual, the price of oil is likely to rise. Conversely, if production rises, the opposite should happen to the price. Oil production is usually agreed through OPEC, although individual member states are allowed to set their own rates. 

Natural Events 

Another factor behind changing oil prices is the environment. Examples of this include natural disasters such as Hurricane Katrina making it difficult to extract oil from offshore rigs, new reserves being discovered and levels of oil in existing reserves becoming depleted. 

Man-made events in oil-producing regions impact on the cost of fuel as well. Wars and political disagreements can hamper oil production. Conflicts in Iraq and Libya have had a profound impact on oil prices, with production greatly reduced during wars in those countries. 

At the time of writing, political unrest in Venezuela and the country's oil industry's waning fortunes are heavily linked. The fall in oil prices there has played a huge role in its decline, as did mismanagement by governments past and present. Events like these are worth paying attention to if you are interested in the fortunes of crude oil. 

Monitoring Data 

As with other commodities such as gold, there is a lot of data to process for oil. The prices change when the markets are open, which is typically on weekdays only (national holidays excepted). If you want to take a forex trading course, learning about the oil markets and all the associated data will prove invaluable. 

To monitor data, you need to familiarise yourself with line graphs. They are pretty easy to follow and can be accessed through either a trading platform/app or a reputable financial news website. There are quite a few different benchmark oil prices to look out for, the main ones being: 

  • Brent crude oil
  • West Texas Intermediate crude oil
  • Dubai crude oil 
There are other benchmark pricings for crude oil on sale in markets including Russia, Mexico and Canada, but Brent, West Texas Intermediate and Dubai are the most well-known to oil traders. 

Different Regions

When monitoring prices, check which type of crude is traded in different regions. Then, you will have better idea of where to look for news developments. Speaking of news, you must look at what drives prices upwards and downwards in oil-producing countries and regions.

News of a political, environmental or, indeed, economic nature should be read daily. Read it whilst getting alerts on any spikes or drops and you should be in a good place to make an informed decision on guessing the direction of oil prices.