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What Determines the Price of Oil?

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Essentially, Coronavirus has caused oil demand to fall so hard, Crude oil fell to below $1 a barrel. 

Here's where oil was in September and what the factors are that move the price. 

Global oil prices surged sending Brent crude to 3-month highs after Iran vowed revenge for the U.S. killing of Major-General Qassem Soleimani outside of Baghdad.  

Brent crude futures contracts for February delivery, the global benchmark for pricing, climbed 4.4% higher from their Thursday close in New York and traded at $69.09 per barrel, the highest level since the days following September's missile strike on a Saudi Aramco tanker in the Strait of Hormuz.

According to the Pentagon, President Donald Trump ordered the strike following an attack on the U.S. embassy in Baghdad earlier this week. 

The strike saw global markets slide with U.S. futures plunging from the all-time highs set Thursday.  

But why did it send oil higher? 

In a recent educational video, we dug into what actually moves oil prices...and surprise:

Supply and demand.

But beyond that, we're going break down what the core factors are influencing supply and demand. And furthermore, we're going to explain to you why negatives things - like an attack on an oil plant - is actually a near-term positive for oil prices.

Remember economics 101? Did you fail that class? Don't worry. When there's more supply of a good than demand, price will fall. Buyers have leverage. If supplier 'X' sells at $10, supplier 'Y,' eager to compete for sales with X, will sell at maybe $9. There are only a few buyers and many suppliers, after all. When there's higher demand than supply for a good, the sellers have leverage. Buyers are competing with each other for purchases, so buyer X is willing to pay a higher price to elbow buyer Y out of the way.

OPEC usually tries to keep supply low, but the U.S. of late has produced enough oil to ruin OPEC's party. 

Need to see more to fully understand? Watch the rest of the video above. 

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