You don’t have to be a Nobel Prize winner in economics to know that the two basic influences on the price of oil, or any commodity for that matter, are supply and demand.
That is the stuff of the most basic economic theory, and I would hope that anyone who trades or invests in energy-related securities understands it. However, understanding the theory doesn’t always help with interpreting and analyzing what is happening in energy markets or with predicting what will happen. Reality and academic theory are often two very different things.
In theory, it should be possible to look at influences on supply and demand, weigh them against each other, and then make a prediction. That is what I and every other trader and investor attempt to do every day, after all. The problem, though, is that while one thing is moving or changing, others don’t stay static. So, at times, we get to where we are now, where there are factors on both the supply and demand side of the equation that are currently or could soon have a big impact on the price of oil, and their power and impact must be weighed against one another. That is why I do an occasional analysis of each side of the equation.
So, what are those factors, and what are they saying right now about oil prices?
Influences on Supply
Geopolitics and the Middle East