What drives crude oil prices?

1 Energy Information AdministrationIndependent Statistics & AnalysisWhat drives crude oil prices? June 7, 2022 | Washington, DCAn analysis of 7 factors that influence oil markets, with chart data updated monthly and quarterlyCrude oil prices react to a variety of geopolitical and economic eventsJune 7, 2022 Low spare capacityIraq invades KuwaitSaudis abandon swing producer roleIran-Iraq WarIranian revolutionArab Oil EmbargoAsian financial spare capacity exhaustedGlobal financial collapse9-11 attacksOPEC cuts targets mmbpdOPEC cuts targets mmbpdSources: Energy Information Administration, RefinitivAn LSEG BusinessOPEC production quota unchanged2 Global pandemic reduces oil demandWorld oil prices move together due to arbitrageSources: Bloomberg, RefinitivAn LSEG BusinessJune 7, 20223 crude oil prices are the primary driver of petroleum product pricesSource.

2 Short-Term Energy OutlookJune 7, 20224 Economic growth has a strong impact on oil consumptionSources: Energy Information Administration, Oxford EconomicsJune 7, 20225 Changes in expectations of economic growth can affect oil pricesSource: Oxford EconomicsJune 7, 2022 Note: Starting in January of each year,each line shows the expected forecast ofGDPgrowth for the specified calendar year,which tends to move toward theactual realized growth outcome as theyear continue to evolve into thenext calendaryear as revised GDP data become available ( , 2021 GDP expectations are revised even during 2022).6In OECD countries, price increases have coincided with lower consumptionSource: Short-Term Energy OutlookJune 7, 20227 Rising oil prices held down global oil consumption growth from 2005-2008, despite high economic growthSource: Short-Term Energy OutlookJune 7, 20228 Changes in non-OPEC production can affect oil pricesSource: Short-Term Energy OutlookJune 7, 20229 Non-OPEC supply expectations indicate changes in market sentiment concerning oil supplySource: Short-Term Energy OutlookNote: Starting in January of each year,each line shows the expected forecast ofnon-OPEC supplyfor the specified calendar year,which tends to move toward theactual realized supply outcome as theyear 7, 202210 Changes in Saudi Arabia crude oil production can affect oil pricesSources.

3 Energy Information Administration, RefinitivAn LSEG BusinessJune 7, 202211 Sources: Energy Information AdministrationUnplanned supply disruptions tighten world oil markets and push prices higherJune 7, 202212 Source: Short-Term Energy OutlookDuring 2003-2008, OPEC s spare production levels were low,limiting its ability to respond to demand and price increasesJune 7, 202213 The years 2003-2008 experienced periods of very strong economic and oil demand growth, slow supply growth and tight spare capacitySource: Short-Term Energy OutlookJune 7, 202214 Inventory builds go hand-in-hand with increases in future oil prices relativetocurrent prices (and vice versa)Source: Short-Term Energy OutlookJune 7, 202215 Open interest in crude oil futures grew over the last decade as more participants entered the marketSource: BloombergJune 7, 202216 Physical participants (producers, merchants, processors, and end users) futures market contract positionsSource: commodity Futures Trading Commission, Commitments of TradersJune 7, 202217 Money managers tend to be net long in the oil futures marketSource: commodity Futures Trading Commission, Commitments of TradersJune 7, 202218 crude oil plays a major role in commodity investmentSource: BloombergJune 7, 202219 commodity index investment flows have tended to move together with commodity pricesJune 7, 2022 Source: Bloomberg20 Correlations (+ or -) between daily price changes of crude oil futures and other commodities generally rose in recent yearsNote.

4 Correlations computed quarterly< to to to to to > correlationPositive correlationJune 7, 2022 Natural Gas000101000111000000001100000000#000000 0000#0000#00000000000000#0#00000#0#000#0 Gold00#00000000001000001110000101#011101 00000000#000#000###000#0000#00##000##000 0 Copper#0#00000#00#0100000010110111110101 11111001000#0100001000000000000000100000 000 Silver00#0000#00000100000111000011100001 0100000000#0000000000000000000000#000##0 000 Soy#0#0#0#000000000000010110100000000100 000#00#00#0000000000000#00#0000000000000 Corn#0##000#000000000#001001100100#00000 0000#0#000#00000#0000000#0#0#00#10000000 0 Wheat00#0000#0000#0001##0000011010000000 0000#####0#0#0000#0000000##00000#0#00000 00 2018201920202021202220132014201520162017 2008200920102011201220032004200520062007 21 Correlations (+ or -) between daily returns on crude oil futures and financial investments have also strengthenedNote.

5 Correlations computed quarterly< to to to to to > correlationPositive correlationJune 7, 2022 S & P 500####00###0#000#0000#0#0001101111#1110 11001000000000010000##00000000000000#01# Dollar###############0##0############### ########0#######0#0##0##0####0##000##### #00 Bonds0000#000#00#00###0#0#0############# ########0##0#########0##0############### #0 WTI Implied Volatility0##0#00#000#0#0####000######## ##0#########0##0####################0### ######1 Inflation Expectations000#0000000011000000101#0000 010001100100#100000001101110000##0010110 000000101 2018201920202021202220132014201520162017 2008200920102011201220032004200520062007 22 For more Energy Information Administration home page | Energy Outlook | Energy Outlook | Energy Outlook | Energy Review | InformationCenter(202) 586-8800 | email: 7, 202223