Yes, oil prices are burning right now, and inflation is getting hotter along with it worldwide. However, the oil's bullish momentum is under threat.
Things You Should Know About Trading Oil
2021-10-12 • Updated
What affects oil price?
Oil is one of the most important assets, which presents the whole economic situation in the world. Just like the prices of most assets, oil price depends on the demand-to-supply ratio. During periods of economic growth, countries increase demand which leads to price gains. On the contrary, when the economy enters a regression phase demand drops and price follows it.
How to trade crude oil online?
There are two ways of trading crude oil online. You can trade contracts for difference (CFDs) or futures. While CFDs display the price in real-time, futures predict a future price change. Futures are the most volatile and risky instruments as they can be manipulated by traders with high capital. During March 2020 collapse Brent futures have been trading under the $0 level, while CDFs only reached $17. That is why we believe that trading contracts for difference is less risky.
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When is the best time to trade oil?
Oil price is influenced by the Organization of the Petroleum Exporting Countries, that is why the meetings and statements of this organization make a huge impact on an oil price movement. Their statements raise oil price volatility, but moreover, they define the future trend. That is why the best option for trading oil is to wait until one of this OPEC’s meetings or statements and follow the trend.
Another highly important data, which usually influences the price, is the US crude oil inventories data as the United States is the largest exporter of crude oil. Bigger reserves mean that the oil consumption stays under pressure, which is the first sign of upcoming economic stagnation. On the other hand, lower-than-expected reserves data points traders to the fact that the consumption grew in the past and the necessary replenishment is needed. In this case, additional purchases will stimulate oil price increase.
OPEC+ said it had “reconfirmed the production adjustment plan”, which referred to its previously agreed decision to add 400,000 barrels per day to the market for November. The recovery in global oil demand from the coronavirus pandemic has been quicker than many expected, while global supply has been disrupted by hurricane outages and low investment. As long as these two factors remain unchanged oil will gain constantly.
Brent 4H chart
Brent's price is moving in the rising channel. The bearish divergence occurred on the RSI chart, that is why expect a tiny correction to the $79.8 support level. After that, the price might reverse and head towards $86.3, where the 2018 high locates. To break this level buyers need to get some strong news, which will act as a buy signal. Without them, the price will get rejected from the $86.3 level and solid correction will happen.
A month after Russia invaded Ukraine, oil markets are still more volatile than ever, with little clarity on how the sanctions will affect Russian crude production as well as global oil demand.
Oil markets were under great pressure amid increased demand and falling supply. OPEC+ is unable or unwilling to achieve its self-imposed production targets and insists on limiting production increases by 400,000 barrels per day despite rising prices.
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