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Crude oil prices are driven by a host of factors, but as with all commodities the balance between supply and demand is a key driver of price movements. What drives supply and demand? Recent history highlights political factors, new technology, and the decisions of major producer groups like the Organization of the Petroleum Exporting Countries (OPEC) as key influences.
Political factors that can move the oil price:
Middle east turmoil
One of the most obvious causes of political disruption that has influenced the oil market through the years is the Middle East. That’s hardly surprising, given the importance of the region for global supplies. The Middle East includes some of the world’s biggest producers of oil, including Saudi Arabia, Iran, and the United Arab Emirates (UAE).
The volatility of the region has significant implications on the supply of oil on a number of fronts, most notably owing to the impact on transportation. The stability of those oil producing nations and their neighbours is crucial to maintaining a global supply line. With that in mind, having an understanding of the region will determine where to look for potential threats to output.