Unlike other markets, the oil market has gained global importance as its development directly affects all other commodity markets worldwide. Like in any other market the interaction the oil market supply and demand establish the oil prices. There are a few particular elements that can determine how the oil market differs from other commodity markets in terms of forming prices and establishing competition.
·   Oil supply
The most critical role in the oil supply side of the market is played by the Middle East region that makes up most of the members of OPEC – Organization of Petroleum Exporting Countries (OPEC) that currently is formed by Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates and Venezuela.  Out of these nations Saudi Arabia is the world’s largest oil producer and reserve holder.
The second largest producer is the North American region – The US and Canada which is followed by the oil production in Russia and the former Soviet Union region.
Accounting for 40% of the world’s production and 70% of the world’s reserves, the OPEC acts as a “quasi†cartel imposing a higher pressure on the market and making the other competitors act like price takers. The political instability in the Middle East has added uncertainty costs that have made the market for oil form prices in an unusual way. (Read more about the oil market price history in the “Oil market history “page)
·   Oil demand
The world’s largest oil consuming region is North America, followed by Asia, where the largest consumer is Japan, and then Europe, where the consumption patterns among nations are more uniform. The industrialized nations of the world account for 2/3 of the oil market demand on the global oil market. The increase in demand spiked by the BRIC nations’ recent economic development ( Brazil, Russia, India and China) has led to the recent spike in prices on the world oil market in the summer of 2008 when the price of a oil barrel hit $147.
For a more detailed market report you can visit the US Energy Information Administration’s web page .