What Influences Oil Prices

by Thinus Briers | Sep 19, 2023 | Forex Analysis

oil

What Influences Oil Prices

This week let’s have a look at the political factors that influence the oil price.

Political factors can have a significant influence on oil prices. Oil is a critical global commodity, and its price is subject to a complex interplay of supply and demand dynamics. Political events and decisions can affect both the supply and demand for oil, leading to fluctuations in its price.

Here are some ways in which political factors can impact oil prices;

Geopolitical Conflicts: Geopolitical tensions and conflicts in oil-producing regions can disrupt oil production and distribution. For example, conflicts in the Middle East, such as those involving Iran or Saudi Arabia, can lead to supply disruptions, causing oil prices to spike.

Supply Disruptions: Political instability in major oil-producing countries can lead to supply disruptions. This can include strikes by oil workers, civil unrest, or government policies that curtail production. Such disruptions reduce the global oil supply, causing prices to rise.

Sanctions: The imposition of economic sanctions on oil-producing countries can restrict their ability to export oil. Sanctions on major oil producers like Iran or Venezuela have reduced the global supply of oil in the past, leading to price increases.

OPEC Decisions: The Organization of the Petroleum Exporting Countries (OPEC) is a political and economic alliance of oil-producing nations. OPEC decisions, such as production quotas, can directly impact global oil supply and prices. When OPEC countries agree to cut production, it often leads to higher oil prices.

Energy Policies: Government policies and regulations related to energy production and consumption can influence oil demand. For example, policies that promote the use of renewable energy sources or electric vehicles can reduce oil consumption and put downward pressure on prices. Conversely, policies that encourage increased oil consumption, such as subsidies for gasoline, can have the opposite effect.

Currency Exchange Rates: Political stability and economic policies can affect currency exchange rates. Since oil is priced in U.S. dollars, changes in exchange rates can influence the purchasing power of oil-importing countries. A weaker currency can make oil more expensive for those countries, contributing to higher prices.

Trade Disputes: Trade disputes and tariffs can impact the global economy, which, in turn, affects oil demand. A slowdown in global trade can reduce economic growth and oil consumption, leading to lower oil prices.

Climate Agreements: International agreements and policies aimed at reducing greenhouse gas emissions can have long-term implications for the oil industry. Efforts to limit fossil fuel use may reduce the future demand for oil, which can impact oil prices over time.

Elections and Political Leadership Changes: Changes in political leadership and government policies can have significant implications for the energy sector. For example, a government that prioritizes domestic oil production may increase supply, potentially lowering oil prices.

It’s important to note that these political influences are intertwined with economic, environmental, and market factors. Oil prices are determined by a complex web of interactions, making it challenging to attribute price movements solely to political factors. Traders, analysts, and policymakers closely monitor political developments alongside other variables to understand and predict oil price movements.

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DXY chart:
Strong move away from the area I’ve have been speaking about for a few months now. Looks increasingly likely that the US will have to make another interest rate increase…or delay a cut longer.

Gold;
Strong gold push last week, halted by a strong $ on Friday.

Oil;
Looking very very bullish now.

Bitcoin;
Strong $ putting pressure on crypto again this week. (30k is a BIG level)

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Red flag news:
Insane amount of news this week.
-FOMC!
-US unemployment.

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MAJORS

EUR/USD: 1.0800 is still key for me. I would like to see a clear break down and then pull back to this level to short. (Fundamentals also seem to be supporting a stronger dollar now).

USD/CHF: Looking for a break above 0.9060 in order to long. I’d be very hesitant to short this pair now.

GBP/USD: Short from 1.2500

AUD/USD: Short from 0.6500. 0.66500 also very interesting for a short but its ‘far’ away.

NZD/USD: Short from 0.600

USD/CAD: Long from 1.3400

USD/JPY: Still leaving alone for now. Be careful of Japanese government intervention.

CROSSES

EUR/GBP: *See video. Keep an eye on 0.8650

EUR/CAD: I want a clear break below 1.4400

AUD/CAD: Tight channel forming -see video.

GBP/AUD: 1.9250 is key. Look for a break above or below.

GBP/CAD: Same as above. 1.6850 is key…look for the reaction off this level.

GBP/CHF: See video.

AUD/NZD: Long from 1.08500. I’m looing to long earlier via the shorter timeframes.

As always, remember correlation! -Especially when taking more than one JPY trade!

M3 -Shorter timeframes.

I do my analysis on daily and weekly charts first and make a note of the MAJOR areas of support and resistance. Then copy them onto Pierre’s Earth and sky template. Then I make a note of the weekly & monthly pivots points and add them to the charts. You will see lots of opportunities line up during the week. The important thing then is to select a bias for the next few days and do NOT take trades if the price is too near a trend line or pivot. Ideally, you want to buy when the price is near a major support and or pivot point line and has the potential to make at least 40 pips. Vice versa for a short.

New members, please note: If I am looking to take a trade long, for example, 1.5000, I place my order 10 pips above & 10 pips below for a short. This is because price often does not quite reach a major line and you need to allow for spreads.

We are NOT a “tipping service” our aim is to teach you how to trade for yourself.

Watch the video below for more detailed explanations of this week’s analysis and trade plan (click the 4 arrows bottom right to view full-screen):

Regards
Thinus

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