Global oil prices are mainly influenced by demand, supply and market sentiment, according to Investopedia. Oil price futures also affect the world's oil price, as claimed by About.com.Continue Reading
The higher the demand for oil, the higher the oil price and vice versa, as explained by Investopedia. When the supply of oil increases, the price reduces, and the opposite is true.
Global oil supply is influenced by the Organization of Petroleum Exporting Countries, which is constituted by 12 countries that control 46 percent of the total global oil production, explains About.com. This alliance of countries controls the supply of global oil which affects the global oil prices. The organization aims at maintaining the global price of 1 barrel of oil at $70.
The global oil demand is influenced by the quantity of oil consumption, states About.com. For instance, the U.S. consumes 21 percent of the global oil. This consumption is attributed to the country's expansive highway network that was constructed in the mid-20th century to counter the risk of nuclear attack.
Oil futures are agreements to trade oil at a predetermined price at a later date, reports About.com. The traders project future supply and demand, and they bid on the price depending on their projections. This causes the global oil prices to rise or fall accordingly.Learn more about Investing