1. Commodities Market
Crude Oil

2. Demand and Supply
Crude oil is one of the most basic global commodities. The price of crude oil experiences large price changes in times of shortage or oversupply. The price of any commodity is influenced by two main factors, its demand and its supply.
The demand of crude oil is rising sharply due to high growth and demand from the emerging economies. On the supply side, the major sources of supplies are still the same as they were in the last decade.
Crude oil inventories have demonstrated a recurring pattern in the past. Usually, crude oil inventories increase in the summer months and decrease in the winter months. This is because cold temperatures in the winter increase the use of energy for heating in many cold countries. The demand for fuel goes above supply and results in a need to use inventories.
Likewise, during warm summer months, supply generally exceeds demand and inventories build up. Hence, the crude oil prices drop. Crude inventory levels provide a good signal of the price direction.
Prices of essential commodities like crude are also one of the prime drivers of inflation in the global economy . As we get more globalised , domestic firms and investors need to understand the world economy and financial markets well, in order to respond well to the new realities of an open economy.

3. Fluctuation
Fluctuation is the irregular rising or falling in number or amount.
The reason for the fluctuation of the oil prices in the recent months is not because of the change in the demand rate but due to the excessive production of oil by many countries.
Fluctuation in the crude oil prices has both direct and indirect impact on the global economy. Therefore, the prices of crude oil are tracked very closely by investors. When the current President of the United States took office the price was $35.00 per barrel. By the end of prices had almost doubled bringing the average to $56.35.
The political uncertainty in West Asia meant that Crude was at $115 a barrel in June However, crude prices dropped significantly during the early months of 2015 hitting extreme lows unseen since As of January this year crude oil is at it’s lowest level since March 2009 which is $51.12.

4. Reasons for Fluctuation
The reason for the fluctuation of the oil prices in the recent months is not because of the change in the demand rate but due to the excessive production of oil by many countries.
The US has produced shale gas within the country itself and as a result other countries like Saudi Arabia who earlier were the major importers of oil are now facing stiff competition.
Another reasons for the fluctuation of crude oil is because the demand figure that was predicted by OPEC was wrong and the correct figure was less than expected. Consequently the production of oil was more than the demand and as a result the prices reduced.
This fluctuation was supposed to settle again after few months but this did not happen because Saudi Arabia has not reduced its oil production even now. This is because they want their competitors like American Shale Gas producing companies to suffer so that Saudi Arabia again emerges the winner in terms of oil producing countries.

5. This chart shows the monthly averages of Crude Oil Prices between 1998 and 2009.
It shows that up until the middle of 2008 there was a positive relationship. Then there was a change in prices and it decreased a significant amount in 2009.

6. Price falls
Crude oil prices have been decreasing since The initial fall was rapid and unexpected. This was because production grew faster than projection and demand declined faster than expected, resulting in an excess of oil for sale in the world.
WHY IS THE PRICE OF OIL FALLING?
Mostly because of increased supply from America—up by 4m barrels a day since Although most crude exports are still banned, American imports have plummeted, contributing to a excess on world markets. Other producers have decided not to try to curb their production and keep the price up.
OPEC is dominated by Gulf producers, notably Saudi Arabia. They have huge reserves to cushion the impact of low prices. They also hope that the slump will eventually shut down high-cost production, tightening the market again.
OPEC
Oil prices are driven by global changes in supply and demand along with a number of other geopolitical factors. Worldwide oil production is controlled by OPEC – the Organization of the Petroleum Exporting Countries, which aims to keep a stable price-per-barrel for crude oil. OPEC’s goal over the past decade has been to keep the price of oil around $30/barrel however major global events have made this task increasingly difficult over time.

7. Effects and Factors
The rise in crude oil prices is not good for the global economy. Price rise in crude oil virtually impacts industries and businesses across the board. Higher crude oil prices mean higher energy prices, which can cause a ripple effect on virtually all business aspects that are dependent on energy (directly or indirectly).
There are many factors that influence the global crude oil prices including technology to increase production, storage of crude oil by richer nations, changes in tax policy, political issues etc. In the past, we have seen many factors influencing the prices of global crude oil.

8. The black line on the graph represents the “world price”
The black line on the graph represents the “world price”. The “world price” of crude oil can be affected by factors such as natural disasters, war and recession.

9. Recession and Oil Prices
Natural disasters and Oil Prices
War and Oil Prices
Hurricane Katrina halted oil production along the Southern Gulf Coast of the United States. As supply decreased, and demand remained the same, oil prices increased to over $70 a barrel in a short period of time. In order to resolve the issue, as prices peaked, President Bush released 30 million barrels from the Strategic Petroleum Reserve (SPR) bringing the price of oil back down.
Political instability in the Middle East has caused great concern about access to oil given that this region accounts for a large amount of the worlds oil supply. Oil prices reached over $136 a barrel due to global concerns about the wars in both Iraq and Afghanistan. One of the main reasons that oil prices rose during this time period was due to the fact that suppliers were unable to convince buyers that they would be able to properly deliver oil.
In a recession there are a number of factors that can decrease demand for oil which causes the price of oil to drop.
First, as consumers cut-back on their expenses driving is oftentimes one of the first expenses that will be cut.
This reduction decreases oil demand and therefore reduces oil prices.
Another factor is decreased demand for products.
Shops see less people buying goods and in-turn reduce their forecasts with suppliers. This creates less demand for the shipment of goods which reduces demand for oil.

10. Important Factors…
Production: A large part of the world's crude oil share is produced by OPEC (Organisation of Petroleum Exporting Countries) nations. Any decisions made by OPEC countries to raise the prices or reduce production and vice versa, immediately impacts the prices of crude oil in the global commodity markets.
Natural causes: In the past, we have seen many events driving instability in the crude oil prices. Events like a hurricane hitting the oil producing areas in the US have caused the crude oil prices in global markets to change.
Inventory: Oil producers and consumers build a storage capacity to store crude oil for immediate future needs. They also build some inventories to guess the price expectations and sale opportunities in case of any unexpected changes in supply and demand. Any change in these inventory levels triggers changes in crude oil's prices which in turn creates ripples in the stock markets.
Demand: The demand of crude oil is rising sharply due to high growth and demand from the emerging economies. On the supply side, the major sources of supplies are still the same as they were in the last decade. This is another factor that is influencing the prices of crude oil upwards. During warm summer months, supply generally exceeds demand and petroleum inventories build up. Hence, the crude oil prices drop.

11. References
oil-prices-fluctuate.asp
cs%20Research%20in%20the%20Department/Kilian%20Oil%20Price %20Fluctuations.pdf
18/news/ _1_oil-producers-and-consumers-opec- countries-prices-in-global-markets
fluctuate-so-much-when-the-demand-for-finished-products-petrol- diesel-kerosene-ATF-etc-is-stable-or-marginally-increasing