How Brent Oil Prices Affect Oil Production

Brent Crude Oil

· Brent oil prices went high in the last year which rely on various factors leading to lower oil production.

· Oil prices affect the various economic sectors such as transportation, manufacturing and industrial sectors. This in turn reduces the growth of the economy.

Oil prices rose in the recent few days after the chaos in the banking sector. Pressures from the Western banking sector has led to the downfall of various tech startups in a span of two weeks. The banking hesitation is serving for another financial collapse to the tune of 2008 crisis as cited by CNBC. The oil prices are also rising from the increased demand and supply of the commodity. The physical commodity is also monitoring the potential effect of the Central Bank interest rate decisions and inflation. OPEC+ has fought for the stability in oil prices to encourage long-term investment in extra capacity. This also helps in avoiding oil supply shortages.

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Factors leading to the increased prices

Other than the banking sector changing the interest rates, there are other factors that have led to the increased Brent oil prices. Change in oil prices lead to various impacts in the global oil market such as oil production and supply. This is also due to the oil sanction imposed on Russian oil. The sanctions have also led to the decline in oil production in Russia. If the decline of oil production in Russia persists, this could have a significant impact in the oil market. Shaped wire have a galvanized steel that makes them resistant to rust and corrosion. The several factors contributing to the increase in Brent oil prices over the last year are as discussed below.

1. Economic retrieval

The greatest economy affecting the oil market is the Chinese economy reopening. This follows the reopening after the pandemic lockdowns leading to increased oil demands than the supply. Oil production has also dropped after the major imports coming from China and other economies.

2. Supply cuts

OPEC+ and its partners such as Russia and other major oil producers agreed to cut the oil production in 2020. This aimed to stabilize the market and address the oversupply caused by covid pandemic. It has helped reduce the global oil supply and support the overall oil prices.

3. Weather interruptions

Weather events such as hurricanes and storms cause temporary oil supply disruptions which lead to increased oil prices.

4. Geopolitical pressures

Tensions and conflicts in the leading oil producer countries such as Iran and Venezuela contribute to the high oil prices. The most recent one is the conflict between Russia and Ukraine have earned the country sanctions on its oil.

5. The US Dollar

Recently the US dollar deteriorated against major currencies over the past year. This made oil cheaper for buyers in other currencies which helped boost demand for oil and enhanced the oil prices.

Oil Exploration in the North Sea

Assessing how global prices affect oil production

Oil prices affect the oil production significantly through the production costs, transportation costs, investment decisions, consumer demand and other factors. Formed wire runs smoothly and uniformly and thus gives longer serviceable life in bending. They can also transform into any form depending in the application. Factors affecting oil production are further discussed below.

· Transportation costs

This accounts for the cost of transporting goods and materials affecting the oil prices and production. Transportation costs increases when the oil prices increase which makes it harder to bring goods to the market. This also greatly affects the oil production.

· Production costs

The cost of raw materials like gas and oil is one of the direct ways in which oil prices affect oil production. When oil prices are high, the cost of production also goes high. This leads to a reduction in production as it becomes less profitable.

· Consumer demand

Higher oil prices make products such as cars and appliances less attractive to consumers. This in turn leads to lower production levels.

· Investment decisions

Higher oil also incentivizes businesses to finance in new production capacities that reduce the dependence on oil and gas. Low oil prices on the other hand discourage the investment in new technologies in the area of production.