Is oil really impossible to predict? Why does the price of oil often react differently than we would expect?
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July 14, 2026
Is oil really impossible to predict? Why does the price of oil often react differently than we would expect?
A news story breaks in the oil market.
Tension arises in an oil-producing country. The possibility of a decrease in production emerges.
Based on the news, it seems logical that the price of oil will rise.
You enter the trade, and a few minutes later, you see that oil does not start to go up, but rather, it begins moving in the exact opposite direction.
In such cases, many traders come to the same conclusion:
"Oil is unpredictable."
However, this is not entirely true!
Oil is one of the most analyzed and intensely followed commodities in the world. Its price is analyzed daily by investment banks, hedge funds, oil companies, and state institutions. Yet, it often seems as if it moves completely illogically.
The price of oil is simultaneously influenced by
supply and demand,
OPEC,
geopolitics,
the dollar,
and what the market expected beforehand.
If you only look at one of these, you can easily jump to the wrong conclusion.
In this article, we present the most important market and economic factors that affect the price of oil in both the short and long term. We look at why the market does not always react the same way to the same news, and how to gain a deeper understanding of how the oil market works.
Short summary
The price of oil is primarily determined by the balance of supply and demand.
A piece of news rarely moves the market on its own. It is much more important how much a given event changes previous expectations.
OPEC+, US inventory data, geopolitical events, the global economy, and the dollar all have a significant impact on the price.
Successful market analysis is not about trying to predict the next move from a single piece of news, but about interpreting all the important factors together.
Brent or WTI? It matters which oil price you look at
When you read in the news that "the price of oil has risen" or "the price of oil has fallen," they are actually mostly not talking about a single type of oil.
In the international market, two reference prices are closely monitored: Brent and WTI (West Texas Intermediate) crude oil.
Although both are crude oil, they are not the same product, so their prices do not always move perfectly together.
Brent – the world's most important reference price
Brent crude is priced based on oil extracted in the North Sea, and this is considered the world's most important oil market benchmark.
The price of a significant portion of the oil exported in Europe, Africa, and the Middle East is pegged to Brent, which is why international news usually mentions this price.
If a geopolitical conflict affects the Middle East or maritime oil transport, its impact often appears first on the price of Brent.
WTI – the dominant oil of the US market
WTI (West Texas Intermediate) is the most important reference oil of the United States.
It is a lighter crude oil with lower sulfur content, so refining it can be simpler and cheaper than many other types of oil.
Its price is more affected by events in the US market, such as EIA inventory data, shale oil production trends, or the storage levels in Cushing, Oklahoma.
Why can there be a difference between the price of Brent and WTI?
Although the two reference prices move in a similar direction in the long term, significant differences can develop in the short term.
There can be several reasons for this:
differing supply and demand conditions in the US and global markets,
logistical or transportation issues,
changes in US inventories,
and geopolitical events that primarily affect international oil trade.
That is why it can happen that after a US inventory data release, the price of WTI moves much more than Brent, while a Middle Eastern conflict exerts a stronger impact on Brent oil.
Which one should you watch?
This depends on what market you follow.
If you want to understand the international oil market, or if you trade CFDs available at most brokers, then you should primarily watch the price of Brent.
However, if you focus on the US market, especially weekly inventory data or US oil production, then the movement of WTI might be more decisive.
Knowing the two reference prices is important because it helps to correctly interpret the news. It matters whether an event primarily affects global oil supply or rather the US market. This often explains why the price of Brent and WTI reacts differently to the same news.
Why does oil often seem unpredictable?
If you have ever traded oil, you have probably encountered this situation.
You look at the news, see that something has happened in the world, and you put a picture together:
"This is positive for oil, so a rise could be coming."
Or:
"This is negative for oil, so a drop is expected."
The problem is that the market does not always move the way we think it will.
A piece of news can be positive or negative in itself, but the price reaction is not determined exclusively by the event itself.
This is why the same type of news can cause a massive move one time, and generate almost no reaction at other times.
Many people then begin to question their own analysis.
Did I miss something?
Was my entry bad?
Should I use a different method?
Yet, often the problem was not with your analysis.
Rather, it was that you interpreted the same information differently than the market did.
What actually moves the price of oil?
Many believe that the price of oil is primarily moved by the news.
In reality, however, the news is only one part of the vast amount of information that the market constantly processes.
The price of oil basically develops as the combined result of six major factors:
global supply,
global demand,
OPEC+ decisions,
geopolitical events,
US inventory data,
and financial markets, especially the US dollar and the interest rate environment.
These factors constantly interact with each other.
Imagine a simple example.
Let's assume OPEC+ announces a production cut.
At first glance, this could clearly be positive news for oil, as fewer barrels reach the market.
However, on the same day, weak US GDP data is published, suggesting that the economy may be slowing down. Investors might then expect demand for fuels and industrial energy to decrease in the coming months.
In this situation, two opposing forces act on oil at the same time.
One would raise the price due to lower supply.
The other would push it down due to expected weaker demand.
The final market reaction depends on which factor investors believe will be stronger.
This is why it happens so often that the same news causes a significant rise one time, and generates almost no reaction another time.
Supply and demand: the driving force of the oil market
No matter how complex the oil market seems, in the long term the price is driven by the same economic principle as for any other product: the balance of supply and demand.
If the world consumes more oil than producers can extract and bring to market, prices typically rise. Conversely, if supply exceeds demand, the surplus can push the price down.
In practice, however, this balance is constantly changing.
What affects supply?
The supply side is primarily determined by the production of oil-producing countries, but many other factors also play a role.
The most important include:
OPEC+ production decisions,
US shale oil production,
geopolitical conflicts and sanctions,
natural disasters or technical shutdowns,
and the use of strategic petroleum reserves.
The shutdown of a large oil field or the loss of a major export route can quickly reduce available supply. At the same time, new production capacity or the lifting of production restrictions can increase the amount of oil available on the market.
What drives demand?
The demand side is primarily shaped by the performance of the global economy.
When the economy is growing, more goods are produced, more trucks are on the road, and air travel and industrial energy use increase. All this can result in higher oil demand.
During an economic slowdown, the opposite can happen. Companies scale back production, transportation needs may decrease, and fuel consumption may moderate, which can weaken demand for oil.
This is why investors closely watch macroeconomic data such as GDP growth, industrial production, purchasing managers' indices (PMI) for the manufacturing sector, or the economic performance of the largest oil-consuming countries – such as the United States and China.
Why doesn't the price always react immediately?
Many expect news affecting supply or demand to instantly and clearly appear in the price. The reality, however, is more nuanced.
The market is constantly trying to estimate how a given event will affect supply and demand conditions over the coming months or even quarters. Therefore, it is often not the news itself that matters, but its expected economic consequences.
For example, a minor production outage in itself might not be enough for the price to rise significantly. If the market believes that other countries can quickly replace the lost volume, the actual impact could remain limited.
The same applies to the demand side. A weaker piece of economic data does not necessarily cause a price drop on its own if investors expect the slowdown to be only temporary.
That is precisely why successful market analysis does not stop at the question of what happened, but also examines to what extent a given event changes the expected balance of supply and demand.
In the next section, we look at why OPEC+ decisions receive so much attention, and how a few sentences at a press conference can move the price of oil by even several dollars.
The role of OPEC+: why can a few decisions move the price of oil by dollars?
If there is an organization whose every announcement the oil market reacts to with keen attention, it is OPEC+.
OPEC (Organization of the Petroleum Exporting Countries) is an organization of the world's largest oil exporter countries, which includes major producers such as Saudi Arabia, Iraq, Kuwait, or the United Arab Emirates. In recent years, the organization's cooperation has been expanded with non-OPEC countries – including Russia, thus creating OPEC+.
Together, the group accounts for a significant portion of the world's oil production, so its decisions can have a direct impact on how much crude oil enters the global market.
How does OPEC+ influence the price?
The most important task of OPEC+ is to modify production quotas.
When the organization judges that there is too much oil on the market and prices have come under sustained pressure, it can decide to cut production. This can tighten supply, which, given adequate demand, can support rising prices.
If, however, the market becomes too tight, or there is a risk that high oil prices will hold back economic growth, the organization can increase production, thereby bringing more oil to the market.
It is important to understand, however, that OPEC+ is not trying to control the daily movements of the price. Its goal is rather to create a more stable balance between supply and demand in the longer term.
Why doesn't the price of oil always rise after a production cut?
This is one of the most common questions in the oil market.
Many believe that if OPEC+ cuts production, the price of oil must automatically rise. Reality, however, is more complex.
The market tries to estimate months in advance what decision the organization might make. Analysts, investment banks, and large institutional players continuously evaluate OPEC+ statements and the production data of member countries.
If a production cut is already a widely expected move, its impact may often partially or entirely appear in the price even before the official announcement.
Conversely, an unexpected decision – such as a larger-than-expected production cut or a sudden production increase – can trigger a much stronger price reaction.
Therefore, it is not enough to watch what OPEC+ announces, but also how much the decision deviates from market expectations.
Not all member countries produce the same amount
Significant economic and political interests often lie behind OPEC+ decisions.
While higher oil prices favor some countries, others are more interested in higher export volumes. Furthermore, it can happen that some members do not fully comply with their committed production quotas.
This is why the market not only watches official announcements, but also how much oil member countries actually produce in the coming weeks and months.
In many cases, these data points are of at least as much significance as the decision itself.
What is worth watching before an OPEC+ meeting?
Before OPEC+ meetings, analysts primarily seek answers to three questions:
Will the production quota change?
What justification does the organization provide for the decision?
What message does it convey regarding the coming months?
Often this last one is the most important. If OPEC+ hints that further production cuts or production increases could be coming in the future, the market begins to price this in immediately.
Therefore, the price of oil is continually shaped not only by current decisions but also by expectations for the future.
Geopolitical events: why does the oil market react so sensitively?
There are few commodities on which geopolitical events have as much impact as on oil.
There is a simple reason for this: a significant part of global oil production is concentrated in regions where the political situation is often uncertain. An armed conflict, a sanction, or even diplomatic tension can be enough for the market to reassess future oil supply.
The price of oil in such cases does not necessarily change because less crude oil is reaching the market right away, but because the risk increases that problems may arise in supply in the future.
Why is the Middle East so important?
If someone regularly follows oil market news, they will probably frequently encounter the names of countries like Saudi Arabia, Iran, Iraq, Kuwait, or the United Arab Emirates.
This is no coincidence.
The Middle East holds a significant portion of the world's largest proven oil reserves, and tens of millions of barrels of crude oil leave the region daily for various parts of the world.
This means that any event that threatens production or transport can quickly impact the global oil market.
The significance of the Strait of Hormuz
One of the most important strategic points is the Strait of Hormuz.
This relatively narrow maritime route connects the Persian Gulf with the Arabian Sea, and a significant portion of the world's seaborne oil reaches international markets through here.
If a military conflict breaks out in the region, or the possibility of closing the strait arises, the market may react immediately.
Not because transport necessarily stops, but because the supply risk in itself is enough for the so-called risk premium to increase. In such times, investors are willing to pay a higher price for oil because they fear that supply could tighten in a short time.
Why doesn't the price of oil always rise as a result of a conflict?
This is one of the biggest misunderstandings in the oil market.
Many people think that a war or military conflict automatically causes a price increase. In reality, however, the market primarily examines whether the event will have an actual impact on global oil supply.
If a conflict does not affect production, does not hinder transport routes, and the market does not expect a sustained supply outage, then the initial price reaction often fades quickly.
Conversely, those events that genuinely threaten production or exports can exert a much larger and more lasting impact on prices.
This is exactly why the same type of news can trigger completely different price reactions at two different times.
The role of sanctions
Geopolitical events do not only appear in the form of armed conflicts.
Economic sanctions can also have a significant impact on the oil market.
If a major exporter country has limited ability to sell oil on international markets, that can reduce global supply. However, the market also considers whether other producing countries are able to replace the lost volume, and whether the affected country can find new export markets.
Therefore, the impact of sanctions is not always clear-cut either. It is not the announcement in itself that matters, but to what extent it alters global supply.
What is worth watching in case of geopolitical news?
When a significant geopolitical event occurs, it is worth asking a few basic questions:
Does it affect oil production?
Does it influence transport routes?
Could a sustained supply shortage develop?
Can the lost volume be replaced by the production of other countries?
If we seek answers to these questions, it is much easier to understand why the market reacts strongly to some events, while other news seems to disappear from the price almost without a trace.
In the next section, we deal with US oil inventory data. Although these may seem like simple statistics at first glance, for the market they are among the most important short-term fundamental indicators, and regularly trigger significant price movements.
Try this next week!
If you take only one thing away from this article, let it be this:
Do not try to guess which way the price of oil will go. Instead, learn to recognize how the market thinks.
Next week, your goal should not be to read as much news as possible, but to read it with different eyes.
When important oil market news is published, think through the following questions:
What does this news change about the expected development of supply or demand?
Is this really new information, or did the market already expect it?
What is influencing the price more right now: this news, or another factor (e.g., OPEC+, inventory data, or market expectations)?
Did the price react the way you thought it would at first? If not, what could be the reason for that?
If you consistently apply this mindset, within a few weeks you will notice that you no longer see isolated news items, but connections. You will increasingly understand what is actually moving the market, and also why it reacts differently to the same news in different periods.
The goal is not to correctly predict every move. The goal is to learn something from every market reaction, and thereby gradually become an ever more conscious trader.
Frequently Asked Questions (FAQ)
What moves the price of oil the most?
The price of oil is primarily determined by the balance of global supply and demand. Furthermore, OPEC+ decisions, geopolitical events, US inventory data, and global economic prospects also have a significant impact on it.
Why does the price of oil rise during wars or conflicts?
Conflicts do not always raise the price of oil because oil supply immediately decreases. Often, it is enough that the market sees greater risk in future production or transport. The market can price this uncertainty in the form of a risk premium.
Why can the price of oil fall even if positive news arrives?
Because the market does not evaluate the news in isolation, but how much it deviates from expectations. If a positive event has already been priced in by investors in advance, a drop may even follow the announcement.
What is the difference between Brent and WTI oil?
Brent is one of the most important reference prices in the global oil market, tracked primarily in international trade. WTI is the dominant reference oil of the United States, which can be more heavily influenced by US inventory data and domestic production processes.
Why are OPEC+ decisions important?
OPEC+ is one of the world's largest collaborations of oil producers, so its production decisions can impact global supply. The market, however, not only watches the decision itself but also how expected it was.
Does the dollar affect the price of oil?
Yes. Since oil is typically priced in US dollars, the strengthening or weakening of the dollar can affect demand for oil and its price. A stronger dollar, for example, can make oil more expensive for buyers using other currencies.
Is it possible to predict the movement of the price of oil?
The price of oil cannot be predicted with certainty, but by understanding the market's driving forces, it is much easier to interpret price movements. The goal is not to predict the direction based on a single piece of news, but to recognize the connections between important factors.
Summary
The price of oil is not moved by a single piece of news or event. Supply, demand, OPEC+ decisions, geopolitical events, and market expectations jointly shape the price movement.
This is exactly why the same news does not always trigger the same reaction. The market looks not only at what happened, but also at how the given event changes the future outlook for oil.
If you understand these connections, you will not only follow the news, but you will also see what factors lie behind the movement of the oil price.
Real knowledge is built not when you read an article, but when you begin to apply it in your own decisions. Observe the market, look for connections, and incorporate every observation into your thinking. Over time, these experiences breed confidence, better decisions, and ultimately more consistent results.
The question now is no longer what you know about the oil market, but what you do with this knowledge.
Check out our accounts, see which one suits you best, and start applying what you have learned.