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What factors cause changes in crude oil prices?

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Quick Answer

Supply based on output, future supplies and demand for oil cause changes in crude oil prices, notes About.com. World crises and natural disasters can also cause the price of oil to fluctuate.

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Full Answer

Trading on commodities exchanges by brokers registered with the Commodities Futures Trading Commission determines the price of oil in the United States, according to About.com. To determine how to bid on oil, traders take into consideration the current supply of oil around the world, which is usually controlled by quotas set by the Organization of Petroleum Export Countries, or OPEC. As increased supplies lead to lower prices, the increase in shale production of oil in the United States can lower the price per barrel of oil, depending on the response from OPEC.

Traders use oil reserves to determine the future supply of oil, including what is available in refineries in the United States and what is held in Strategic Petroleum Reserves, according to About.com. If the price of oil gets too high, the United States can access these reserves to increase supply and lower prices. Oil demand, especially from the United States, can raise the price of oil as supplies go down. World crises, such unrest in countries in the Middle East that supply oil, cause traders to worry about disruptions in supply, causing prices to increase. Disasters such as hurricanes in areas such as the Gulf Coast can raise oil prices by reducing supplies.

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