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Crude Oil Trading

April 13, 2017

Crude Oil Trading

Many new investors find themselves wondering how to trade crude oil inventories. After all, there are a number of factors that drive the oil market – and that make it a particularly volatile area to invest in.

Crude Oil Trading Basics

Before crude oil is refined into petroleum products, this naturally-occurring substance must be released from rock formations found deep within the earth. As new investors soon learn, there are many names for crude oil including Bonny Light Crude and Brent Light Crude. There are also different oil types including heavy, light, sour, and sweet. Light, sweet crude oil requires the least refinement and takes the least amount of time in production, making it the preferred product on world markets.

Like all other commodities, crude oil has its own contract value, ticker symbol, and margin requirements. If you choose to purchase or sell crude oil futures contracts, you will see ticker tape handles that look similar to this: CLK @ 109.48

Crude oil futures contracts are traded at the Intercontinental Exchange (ICE), Multi Commodity Exchange (MCX), Dubai Mercantile Exchange (DME), New York Mercantile Exchange (NYMEX), the Tokyo Commodity Exchange (TOCOM), and India’s National Commodity and Derivatives Exchange (NCDEX).

What is Influencing the Trade in Crude

Approximately 62% of the planet’s accessible oil is currently found in the Middle East, in Qatar, Kuwait, Iraq, Saudi Arabia, and the United Arab Emirates. Drawn out war has cut production to a fraction of its potential, and this is compounded by the fact that Qatar shares an important natural gas field with Iran, meaning that two of five Middle Eastern countries are not producing at their full capacity.

Alternative methods of oil development are becoming more popular, with tar sands and oil shale gaining viability as oil-producing sources. Techniques for turning coal and methane into oil substitutes, which were first discovered in the 1930s, are being re-explored. All of these alternatives to crude oil have an effect on price, and in time, could cause a price upset.

Green energy technology is becoming more common, and this is gradually reducing the demand for crude oil in certain markets.

Supply and demand is crucial to crude oil pricing, especially as certain major oil fields decrease yield. Political instability and market sentiment are two other huge influences, particularly where short-term speculation is concerned.

Crude Oil Trading Strategy

Investors planning to trade crude oil should watch WTI/USD charts for insight on trading trends. WTI is also referred to as West Texas Intermediate or Texas Light Sweet. It is always traded in US currency, and is based on barrels (also known as BBLs) of crude oil.

It can often be difficult to chart the direction of crude oil prices, but there is no doubt that they have a direct effect on Forex and binary options marketplaces. Despite the fact that energy economists have made headway in forecasting short-term crude oil prices, long-term forecasting models are less dependable.

Traders should always be aware of the latest crude oil prices before beginning trades, as prices fluctuate regularly due to a multitude of factors; even natural disasters have an effect on crude oil pricing. Staying informed is key to success in crude oil trading.

Crude Oil Trading Tips

Because crude oil is a volatile commodity, many investors tend to shy away from it. With Forex trading, it is easier than ever to take advantage of this popular investment. There are a variety of oil markers to be aware of, all playing important roles in the energy sector. Oil prices are always streamed live, providing savvy traders with access – and instant exposure – to potentially lucrative opportunities.

When trading in crude oil, investors should continue to build diverse, multi-product portfolios. It can be beneficial to add crude oil trading to foreign exchanges and other commodities, as this can create an ideal mix of investments.

Because oil prices are so volatile and change on a daily basis, traders have the opportunity to take advantage of those price changes. Certain commodities, currencies, and indices offer direct correlations with crude oil, and paying attention to these can provide investors with valuable insight they can use to make better trades.

It can pay to spend some time gauging the level of consumer demand by looking into the relative strength or weakness of global economies; traders can accomplish this by monitoring GDP, consumer spending, and retail sales indexes, as well as by keeping  finger on the pulse of the world’s news.