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How Do I Conduct an Oil Market Analysis?

Oil is commonly transported through elaborate systems of pipelines.
An offshore oil platform.
A pumpjack oil well.
A drill rig is used to drill for oil.
Increased use of rail can help lower dependence on pipelines for oil transport.
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  • Written By: Geri Terzo
  • Edited By: Shereen Skola
  • Last Modified Date: 12 October 2014
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To conduct an oil market analysis, you should consider the main drivers of the market. These components include transportation, such as pipelines, rail, and ships that deliver the resources from refineries and other locations to distributors. Supply and demand should also be included in your analysis because these factors are what drive the price for different types of oil. Also, consider the impact that the development of renewable energy practices are having on the way that traditional oil conglomerates are approaching the markets.

Emerging trends in the way that oil is distributed could result in changes to the way that oil is distributed and the supply of this fossil fuel. Greater distribution of oil could introduce faster and more efficient delivery of the resource to regions in which there is demand. For instance, much of oil is transported via pipelines between states or countries bordering on one another. The increase of the use of rail transportation for oil could relieve some of the dependence on oil pipelines and the development of these underground projects. Subsequently, delivery trends that could affect the volume of oil transported and the places that gain access to the fossil fuel should be included in oil market analysis.

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Supply and demand are among the key components that are relevant to an oil market analysis. The economic conditions in a region can play a role in the demand for this resource. When an economy is showing signs of slowing, the demand for oil in a country is more likely to decrease. A slowing economy is likely to produce a weakening employment scenario in a region, which means that fewer individuals might be commuting or going on vacation to place a demand on oil. Demand for oil is directly related to the price paid for fuel used in vehicles, and lesser demand can translate into lower oil prices.

An oil market analysis might also include observation pertaining to any shifts in the business models of large energy companies. Companies with vast resources that choose to devote a growing percentage of funds and staff to the research and development of alternative energy sources, such as solar and wind power generation, may be worth observing. These businesses could be preparing for a shift, at least partially, away from traditional sources for energy, including oil. Analysts performing oil market analysis can make predictions for future energy production and drilling activity in fossil fuels based on the steps in which businesses are taking towards renewable energy development.

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