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Crude oil prices are often volatile and change very frequently. There are various factors responsible for causing this volatility in prices on oil. Similarly various causes affecting oil price to rise frequently. The most important factor that shapes the oil is demand for crude oil. Crude is in hot demand as fuel, as in most cases it is an unavoidable expense. The demand may go up during the summers as part of a fine weather. Similarly, it may go down during winter as roads are blocked and unapproachable. The crude prices reflect this difference in demand. Crude is a necessary ingredient for heating purposes. For the same reason it is in hot demand during the winter season. This causes the prices to soar during the winters. Many of the crude oil goes towards industries throughout the globe. These industries use the crude for both, the running of industries as well as for transporting the raw material and the finished product. Futures exchanges of crude on the stock market also help determine the prices of crude. These are all factors that affect crude oil price with the demand for oil. As with demand, supply is also an agent in shaping crude oil price. OPEC (Organisation of oil exporting countries) alone controls almost 46% of the world crude oil supply. This group decides on the amount of supply of crude in the world oil market. This change in supply directly affects crude oil prices in international markets. OPEC members soon realised that they owned major portions of the world oil. If they were pitted against one another, their net realisations would be very slow. So they formed an oil cartel (OPEC) to jointly take decisions regarding pumping of oil, supply and pricing. Production of oil is limited only to those geographical areas that have rich oil fields. Even a slight flicker of political unrest in these areas can affect crude prices in the international markets. An example of this is Gulf War, during which the crude oil prices rose to enormous heights. All countries have vested interest in maintaining stable crude prices. As a result they strive to control the prices and maintain peace in these regions. In spite of this, some differences of issues are inevitable. The bilateral treaties signed between countries can also affect the crude price in those regions. Thus there are various factors at work that decide or shape the prices of crude every day and hence there is uncertainty in crude oil market. Kyles Humphrey is an experienced freelancer in oil related fields, who frequently writes articles related to oil prices & indexes and crude oil including tips on investment in oil. Please visit oil.com for more details.
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