Since the start of Q2, the commodities market has been in flux against escalated tensions between Israel and Iran.

On April 1, Israel launched an airstrike destroying the Iranian consulate in Damascus, Syria, leading to the deaths of several senior commanders, including high-ranking Iranian Islamic Revolutionary Guard Corps (IRGC) officers. On April 14, Iran responded with a large-scale unmanned drone and missile attack against Israel, marking its very first attack on Israeli territory. That was followed by limited counter-airstrike by Israel on April 19.

At one point, geopolitical uncertainties pushed WTI crude futures prices above $85 per barrel, hitting the highest level since October 2023, while Brent also surpassed the $90 mark. This week, we’re seeing oil prices coming down. Will geopolitical tensions prompt oil prices to surge and trigger a resurgence in energy inflation? What are some crucial indicators to watch for oil price trends? In this article, we look at 10 crucial charts.

I. Crude Oil Fundamentals

A. Tracking Oil Demand

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▌Product Supplied of Petroleum Products: Since the US is the world's largest consumer of crude oil, the country’s oil demand is crucial for assessing oil price trends. The US Energy Information Administration (EIA) releases daily consumption statistics for oil products on a daily basis. Termed “product supplied of petroleum products”, the indicator represents consumption of petroleum products in the US. Downstream petroleum products include gasoline, distillate fuel, and aviation fuel, each accounting for around 40%, 20% and 10% of oil consumption in the US.

Rising consumption of these products, indicating higher demand, prompts refineries to actively purchase crude oil to produce downstream products, driving up crude prices.

Also, gasoline and distillate fuel consumption exhibit seasonal patterns. Gasoline consumption peaks in summer and fall (driving season), typically from June to November, while consumption for distillate fuel, widely used for heating, peaks in winter around January to April. We can compare performance of the same period in previous years to gauge the current level of consumption. Significant deviations can signal shifts in oil prices.

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▌Global Oil Demand Change Estimates by EIA, OPEC & IEA: The world’s three major energy agencies (EIA, OPEC, IEA) release monthly energy forecast reports, and their global crude oil consumption estimates are an important focus of market participants. In the chart above, we calculate the “yearly change in oil demand” by subtracting annual consumption in 2023 from the consumption estimate for 2024 released each month. Comparing how the yearly change evolves from one month to the next, we can instantly grasp how demand is changing in the oil market.

A significant increase in yearly change in oil demand indicates stronger demand compared to the previous year, which can bolster oil prices. Conversely, a decrease suggests weakness in this year’s demand and downward price pressure.

B. Tracking Oil Supply

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▌US Crude Oil Field Production & Rig Count: Currently, the US is also the world's largest oil producer, so monitoring the country’s crude oil production can help us assess changes on the supply side. Oil rig counts, on the other hand, reflect driller expectations and capital expenditures, as oil producers ramp up drilling operations when they anticipate better price outlook, which pushes up rig count and oil supply.

We can also see from the chart that each drilling rig now produces more crude oil compared to pre-2008 levels. This is thanks to the shale oil revolution that began in 2008, where technological advancements enabled the US to tap into vast reserves in shale formations, significantly boosting production efficiency. Since then, US crude oil production has seen continued and substantial growth, remaining high even when oil prices or rig counts plummet.

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▌OPEC & OPEC+ Crude Oil Production: The Organization of the Petroleum Exporting Countries (OPEC) is composed of major oil-producing countries, with 12 member countries including Saudi Arabia, the United Arab Emirates, and Iran. The organization’s primary goal to ensure price stability in the oil market by coordinating and unifying oil policies among member countries. OPEC+, an extension of OPEC, consists of an additional 10 countries, including Russia, Kazakhstan, Malaysia, and Mexico, enhancing the organization’s market influence.

OPEC's crude oil production accounts for around 40% of global supply, so its production decisions are closely watched by market participants. When OPEC announces production cuts, oil supply is expected to decrease, providing support to oil prices. If the extent of production cuts exceeds market expectations, the price increases could be even more significant.

This was the case in 2016, which was also when OPEC+ was formed. In response to sluggish oil demand and plummeting oil prices against global economic weakness that started in late 2015, OPEC reached a production cut agreement on November 30, 2016. By December of the same year, OPEC brought other non-OPEC oil-exporting nations on board of production curbs. These efforts contributed to the recovery in oil prices. The non-OPEC countries, along with OPEC nations, are known as OPEC+.

C. Assessing Net Demand and Inventories

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▌Global Oil Production & Consumption Estimates: The EIA publishes the Short-term Energy Outlook (STEO) report monthly, which includes global consumption and production data for petroleum and other liquid fuels, including crude oil, gasoline, diesel, and aviation fuel. Data points also include production and consumption forecasts for the coming 1-2 years.

To assess supply-demand dynamics, we can subtract consumption from production. The value is greater than 0 when supply exceeds demand, indicating inventory accumulation and downward pressure on oil prices. Conversely, the value dips below 0 when supply falls short of demand, suggesting oil inventories are clearing out, which will support oil prices to rise.

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▌US Crude Oil Inventories: The blue line in the chart represents year-on-year growth in weekly ending stocks of commercial crude oil in the US, excluding Strategic Petroleum Reserve (SPR), released in the EIA’s Weekly Petroleum Status Report (WPSR). The yellow line represents the year-on-year growth in the monthly estimates for commercial crude oil inventories, excluding SPR as well, released in the EIA’s monthly STEO report.

Declining crude oil inventories indicate inventory depletion and improving market fundamentals, which can support oil prices to rise. On the contrary, rising inventories may signal reduced demand and consumption, a sign of weakened fundamentals and potential price declines.

Crude oil inventories also exhibit seasonality similar to that with oil product demand. Crude consumption at refineries accelerates and inventories drop during peak seasons, including the driving season in summer and early fall as well as winter where demand for heating fuel rises. In contrast, spring and fall mark refinery maintenance periods, during which inventories tend to accumulate.

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▌Estimated Global Net Consumption of Oil Inventories: The EIA's monthly STEO report includes forecasted changes in global oil stocks for each quarter of the year. A negative stock draw indicates potential oversupply as oil stocks are forecasted to build up, which creates downward pressure on oil prices. Conversely, a positive value suggests potential declines in inventories and support for oil prices.

Revisions to the monthly estimates also impact oil prices. An upward revision in the...

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