34591803 - oil prices dropping illustrationOil is the lifeblood of industry and communities around the globe. It powers our cars, provides the energy to heat our homes and drives our manufacturing plants. It creates jobs for literally millions and millions of people. It’s also a popular investment. Oil is one of the most closely-watched commodities, and it drives our markets. Like any commodity, there are a number of factors that contribute to the fluctuating price of this important fuel.

Here are the two main factors:

  • Supply and demand. When oil is scarce and demand is strong, the cost will rise. The reverse is also true.
  • Production from oil-producing countries. Several mid-eastern nations along with Russia and the United States produce the majority of the oil used in the world. The Organization of the Petroleum Exporting Countries will sometimes alter their production to meet market conditions.

The pandemic has driven down oil prices for much of 2020, as coronavirus lockdowns and fear of infection have caused people to virtually stop traveling. Demand for oil has plummeted for much of this year. We can see this at the fuel station, where gasoline prices have dropped to some of their lowest levels in years.

All this culminated in April 2020, when the price of oil went into the negative, below $0, for the first time in history. A massive surplus of oil was eating up storage capacity, so essentially, oil traders were paying people to take the oil off their hands in order to avoid high storage costs. That caused prices to bottom out. We’re now seeing oil prices starting to rebound as economies around the world continue to slowly reopen.

When you’re ready to begin trading oil, contact Steve Mills Attorney for all your legal advice. We’re here for you.