Most always want to start their investing journey in fields that will bring secured profits, but the majority of them don’t have a clear idea on how to reach these goals.
In this article, we will explain how the oil markets represent a great option for investors in terms of profits and diverse options, which help them their your investment portfolios. In the last few years, oil trading has become more and more popular amid investors all over the world.
Perhaps the most important thing about trading in the oil markets is the CFD system. We all know that buying oil contracts does not mean buying and storing a number of oil barrels at home. Oil trading means predicting the price of oil and making profits from this prediction if you manage to get it right. Thus, in oil trading you do not buy oil physically, but rather make profits from its fluctuation in prices.
There are two main benchmarks in the oil market – Brent, a standard for European and
Asian markets, and US West Texas Intermediate crude oil, a benchmark for the Western world, produced in Texas and Louisiana. The chemical differences between these two standards lead to price differences, and it is known that West Texas Intermediate is cheaper than Brent crude. Price movements between them are not considered too large.
The factors that affect these two basic raw materials are almost identical:
Supply and demand: This is a general rule of investment, where prices rise when supply drops and vice versa, prices fall when supply increases. The decline is affecting demand when the major economies that import oil from the exporting countries are affected, while the supply is affected when conflicts and crises in the exporting countries, such as oilfields and oilfields are affected. Supply is also affected by decisions on production made by oil exporting countries.
Political crises: Political decisions that affect the countries exporting and producing oil, such as the US sanctions on Iran, always affect the price of oil positively. The occurrence of such conflicts typically leads to a reduction in supply, and therefore to higher oil prices.
Market reaction: Oil prices and markets always fluctuate depending on the news, not the facts that actually happen on the ground. For example, if news is emerging about some potential problems, prices tend to go up.
In order for investors to make the most of the oil markets, they have to keep an eye on economy news, especially those regarding oil, and follow the data and reports of the United States and OPEC and its non-OPEC allies such as Russia. Other important sources are the US Energy Information Administration, the US weekly inventory report as well as the economic agenda of major oil events around the world.
Finally, the constant price fluctuations in the oil market provide a great investment opportunity to maximize their profits. However, it should also be noted that in some cases, these movements can lead to losses of capital.