What Influences the Oil Market Price
Oil prices change daily and are determined by traders who bid on oil futures contracts. This contract is an agreement that gives traders the right to purchase oil at a set price based on the projection made. Both the buyer and seller set delivery date in the future at the set price.
There are several factors that traders consider :
- Oil Demand: Estimates are provided by the Energy Information Agency; seasonal considerations are taken into account. As demand increases the price should go up.
- Current Supply: OPEC supply and the US shale oil production are analyzed. As supply increases the price should go down.
- Access to future supply: This depends on oil reserves in the US refineries, and the world. These reserves can be retrieved easily if prices get too high.
- World Crisis: A potential crisis could increase oil process since traders worry a war or famine for example could limit the overall supply.
- Man-made disasters and natural disasters such as hurricanes, floods, and oil spills can all influence the price of oil and the world supply of oil inventory.
- Currency strength: Most Energy products are priced in USD, and thus it would be wise to monitor the dollar index in order to better forecast the price dynamics.
For new and experienced traders interested in trading energies and oil, Arrow Trade has many additional services
Main Energies FAQ
Energy trading involves trading the different energy commodities like oil, natural gas, heating oil, gasoline, or even electricity. Energy commodities tend to be quite volatile, making large price swings. They also tend to trend quite well. Both of these characteristics make energy trading the choice for traders who are looking for large profit potential. When adding in the leverage possible with CFDs on energy commodities these are an ideal choice for the aggressive trader.
There are a number of ways to trade energy commodities, including via futures, ETFs, or indirectly through equities. One of the most excellent ways to trade energies is with CFDs. These provide traders with easy access to the market, low fees, high liquidity, and excellent leverage. In order to choose the proper direction to trade it is necessary to learn how the energy markets are correlated with economic data, as the energy commodity markets tend to react quite strongly to certain economic data points.
The volatility and liquidity in oil markets make them an excellent vehicle for trading in the energy markets. Oil prices can easily change by several percentage points in a single session. That opens up large opportunities for traders. For example, the volatility in crude can be exploited through a derivative strategy. These consist of simultaneously buying and selling options. One strategy called a long straddle is when the traders buys both a call and a put with the same strike price. This strategy is profitable as long as there is a large move in price, no matter whether it is higher or lower.
