Explained: Three factors that could impact oil prices

Since mid-May, and especially over the past few weeks, oil prices have seen renewed fluctuations. The fluctuations reflect the ups and downs in the factors determining crude oil prices. Here are three key factors likely to affect the movement of crude oil prices.

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In the simplest terms, crude oil prices will move up when something causes the demand to rise or the supply to fall.

The trend of crude oil prices mirrors the slightest of changes in geopolitics, apart from the steady course of economic news. In the simplest terms, crude oil prices will move up when something causes the demand to rise or the supply to fall.

In the past six months, crude oil prices have steadily risen from the lows of December 2018 — from $50.1 per barrel on December 28 to $74.7 a barrel on May 16 — primarily because of oil production cuts by the Organization of Petroleum Exporting Countries (OPEC), a group of 14 including Saudi Arabia, Venezuela and the United Arab Emirates. It controls roughly 40% of the world’s overall oil supply and its exports account for 60% of all petroleum traded globally — as such, its decisions to cut or expand production have a huge impact on global oil prices.

However, since mid-May, and especially over the past few weeks, oil prices have seen renewed fluctuations (see chart below). The fluctuations reflect the ups and downs in the factors determining crude oil prices. Here are three key factors likely to affect the movement of crude oil prices.

The new Iran Deal

In Vienna on Sunday, officials from Britain, France, Russia, Germany and China met their Iranian counterparts in an emergency meeting hoping to defuse rising geopolitical tensions in West Asia and to salvage the so-called Joint Comprehensive Plan of Action (JCPOA). The JCPOA is better known as the Iran nuclear deal and the US unilaterally pulled out of it in 2018. Since then tensions have escalated between the US and Iran, even as the other countries involved have been trying to avoid the deal from becoming defunct. Over the past few weeks: the US has threatened to launch airstrikes after Iran shot down US drones; the International Atomic Energy Agency has alerted that Iran has breached its side of the bargain by stockpiling more low-enriched uranium (which is used to make nuclear bombs) than it was allowed to in the nuclear deal; and Iran and the United Kingdom have impounded each other’s oil tankers.

After the first meeting in Vienna, Iran’s Deputy Foreign Minister Abbas Araghchi said: “The atmosphere was constructive. Discussions were good. I cannot say that we resolved everything, I can say there are lots of commitments”. This signalled that supply disruptions may not happen and, as a result, oil prices cooled off.

US-China talks

The second big factor is the trade impasse between the US and China. Talks between the two biggest economies restarted in Shanghai Monday. The key worry is that if the tussle carries on between the two economies, it will further slow down global growth (and hence oil demand). The initial response from the talks is pessimistic and as such, here, too, the result has been that oil prices came down a bit, but only after they had first gone up in hope.

Federal Reserve rate cut

The third big factor is the decision of the US Federal Reserve later in the week. The Fed, as it is often called, is widely expected to cut interest rates for the first time since the 2008 financial crisis. The link between a cut in interest rates and oil prices is not clear. However, if the rate cut leads to higher demand, chances are oil prices will move up.

Udit Misra

Udit Misra is Senior Associate Editor at The Indian Express. Misra has reported on the Indian economy and policy landscape for the past two decades. He holds a Master’s degree in Economics from the Delhi School of Economics and is a Chevening South Asia Journalism Fellow from the University of Westminster. Misra is known for explanatory journalism and is a trusted voice among readers not just for simplifying complex economic concepts but also making sense of economic news both in India and abroad. Professional Focus He writes three regular columns for the publication. ExplainSpeaking: A weekly explanatory column that answers the most important questions surrounding the economic and policy developments. GDP (Graphs, Data, Perspectives): Another weekly column that uses interesting charts and data to provide perspective on an issue dominating the news during the week. Book, Line & Thinker: A fortnightly column that for reviewing books, both new and old. Recent Notable Articles (Late 2025) His recent work focuses heavily on the weakening Indian Rupee, the global impact of U.S. economic policy under Donald Trump, and long-term domestic growth projections: Currency and Macroeconomics: "GDP: Anatomy of rupee weakness against the dollar" (Dec 19, 2025) — Investigating why the Rupee remains weak despite India's status as a fast-growing economy. "GDP: Amid the rupee's fall, how investors are shunning the Indian economy" (Dec 5, 2025). "Nobel Prize in Economic Sciences 2025: How the winners explained economic growth" (Oct 13, 2025). Global Geopolitics and Trade: "Has the US already lost to China? Trump's policies and the shifting global order" (Dec 8, 2025). "The Great Sanctions Hack: Why economic sanctions don't work the way we expect" (Nov 23, 2025) — Based on former RBI Governor Urjit Patel's new book. "ExplainSpeaking: How Trump's tariffs have run into an affordability crisis" (Nov 20, 2025). Domestic Policy and Data: "GDP: New labour codes and opportunity for India's weakest states" (Nov 28, 2025). "ExplainSpeaking | Piyush Goyal says India will be a $30 trillion economy in 25 years: Decoding the projections" (Oct 30, 2025) — A critical look at the feasibility of high-growth targets. "GDP: Examining latest GST collections, and where different states stand" (Nov 7, 2025). International Economic Comparisons: "GDP: What ails Germany, world's third-largest economy, and how it could grow" (Nov 14, 2025). "On the loss of Europe's competitive edge" (Oct 17, 2025). Signature Style Udit Misra is known his calm, data-driven, explanation-first economics journalism. He avoids ideological posturing, and writes with the aim of raising the standard of public discourse by providing readers with clarity and understanding of the ground realities. You can follow him on X (formerly Twitter) at @ieuditmisra ... Read More