Crude Oil market is the best option to trade if you do not know where to invest your money, then the oil market is a great option for you. Oil attracts the attention of investors around the world. In this article, we will tell you why this is so and how to increase your income on the oil market.
Contract For Difference (CDF)
Considering investing in the oil market, you will see three magical letters CFD. CFD is an abbreviation for a contract for difference. We know that oil is counted in barrels. But you should understand that when going to the oil market, you will not get real oil in the container. But what will you get? The idea is to estimate the asset’s price and win at the right forecast. As a result, when you come to the market, you make money but do not buy goods.
How does a CFD cost? The price coincides with the so-called futures prices on the Intercontinental and New York Mercantile exchanges.
Brent and WTI
Do you know that you have not found just one chart of the oil market? There are two major oil benchmarks in which you can invest. They are Brent and WTI.
Brent crude is a standard for the European and Asian markets. This benchmark includes more than 15 oil grades produced on the Norwegian and Scottish shelf blocks of Brent, Ekofisk, Oseberg, and Forties.
The WTI is a mark for the Western Hemisphere. It is mainly produced in American oil fields in Texas, Louisiana, and North Dakota.
There are two differences between these benchmarks. The first is a space, the second is a chemical formula. So they differ in price. WTI is cheaper than Brent. However, if you look at their chart, you will not see a significant difference in their movement.
Although there are differences between oil benchmarks, there is no difference in the factors that affect them.
The factor affecting every market is demand and supply. Just remember a simple rule: when supply increases – when supply increases – price goes down. Conversely, when demand falls – price decreases when demand increases – price increases.
Why can demand/supply change? The decline in demand is due to the weakness of the economy of the largest oil importers.
Supply declines are caused by conflicts, restrictions, and problems with oil drilling rigs. The increase in supply always depends on the decision of the oil exporters to increase production.
Demand and supply are fundamental factors and all other drivers are based on them.
Political events affect on Crude Oil market
Uncertainties, conflicts, restrictions related to the largest oil producers always positively affect oil prices. The idea is clear: conflict leads to a cut in supply, a drop in supply leads to an increase in oil prices. You just have to follow this news.
Market sentiment of the Crude Oil market
Market sentiment is an upcoming factor from political events. A feature of the oil market is that the price changes are based on facts. For example, prices rise immediately as soon as possible problems with future supply are reported. The market also does not require confirmation of data on supply decline.
As the oil market is affected by market sentiment, oil producers use it in their favor. You should always remember this factor when investing in oil. After the market, sentiment is the best strategy for the oil investor.
How to predict market movements?
As I mentioned above depends on the market sentiment. To capture this feeling, you need to read the news and follow the comments of non-OPEC allies like the US, OPEC, and Russia.
Report to learn more about the demand/supply issue, you should follow US Energy Information Administration reports. Here you should pay attention to the crude oil inventory data that is available every week (check the economic calendar) and a variety of forecasts on demand and supply that you can find on its website. Of course, you also remember OPEC. The organization also distributes reports.
What opportunities does the oil market give you?
Volatility is the main factor that attracts the attention of investors. With big daily moves, the market offers great opportunities to boost your income. However, at the same time, you must remember that high volatility can cause damage. To avoid negative consequences, you must remember about risk management. What’s more, the market is highly interesting for gamblers. You will never get bored of investing in the oil market. News reports come daily and the price jumps up and down. If you are inspired by sports, then investment in oil market is definitely for you.
Brent and WTI are among the most traded benchmarks in the world. Supply and demand are fundamental factors that determine the direction of the market. Remember about the US Energy Information Administration and OPEC reports. Following market perception is the key to a great profit.
Learn to trade at high volatility.