When oil companies expect the price of oil to be higher next year, then the supply of oil decreases.
Among commodities, oil is the gem. Plastics, asphalt, and fuel are just a few of the uses for it. Because of this, the oil industry is a major driver of the economy, and governments, businesses, investors, and traders actively monitor fluctuations in oil prices.
The global economy can be rocked by volatile oil prices. Oil prices are affected by changes in both consumption and supply. Oil is not, however, a luxury good like a diamond or caviar, which has a limited use and most people can live without. The price of oil is mostly determined by market forces because it is both plentiful and in high demand.
Supply and demand, a fundamental tenet of economics, is one factor that influences oil prices. According to the law of supply and demand, when supply rises, prices should fall.
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