Among the most popular products traded on commodity markets is crude oil; or what is commonly known as "black gold".Previously preserve for large intuitional investors, corporations, central banks, wealthy individuals and hedge funds, crude oil is now available for small investors too.This new development was made possible by the introduction of contract for difference (CFD), which allows individual investors how to start trading in futures contracts of crude oil on an online platform through their brokers.Before you join the market and start trading crude oil, you must be fully aware of how the market functions to maximize your returns and minimize your loses when you enter the market. The most important thing to understand is the demand and supply dynamics surrounding crude oil worldwide.You must also have a good understanding of the market forces that trigger different movements of crude oil prices on the market.This is quite important because of the fact that when trading futures contracts for crude oil, you're basically trading in a derivatives market where all the principles and products of negotiating directives derivatives apply.a key derivatives market characteristic is that you really do not have have the underlying asset that you place a trade; rather, monitor its price movements and place trades based on your prediction of how the price of the underlying asset will move in a given period of time.For example, you can predict that the price of oil will go up to say $ 100 to $ 110 per trading day. You then place a trade based on your prediction and agree on the exercise price which is the amount you get if your prediction is well.At the time of the expiry of your business, if your prediction is correct, you get the price of pre -determined year and agreed to. However, if the odds are against you lose money on the market.
the demand for crude oil
price of crude oil movements are subject to the universal laws of economics of supply and the demand. Increased demand
for crude oil will result in higher prices for the same product if the power remains constant. On the other hand, a high supply of crude oil to the rest of the constant demand will mean lower prices for the productWhen those prices fluctuate, your trades in futures contracts on crude oil markets are affected. and therefore as a trader, you must have a clear understanding of the forces that cause these price movements.You should also monitor trends in the market to ensure that you are on the right track at all times and that any news affecting your product is captured in your trading decisions.The main factors affecting the demand for the growth of crude oil savings that is often linked to industrialization. As economies develop, their demand for oil increases as well because they need oil for machinery in their industries.Economic growth is also associated with a bulging middle class that are known to be the biggest spenders on mobile auto; which at the end of increasing oil demand to fuel these vehiclesThe weather conditions also affect oil demand. winter demand being driven by the need for fuel to heat households while in summer, more cars are on the road where fuel demand for vehicles drives global oil demand.Another important factor to consider is population growth; most people are in a country, the more demand their energy and oil just comes as an easy source of energy, therefore pushing demand.
Crude oil supply
the supply side of things, the main factors influencing crude oil supplies are geopolitics, exploration costs and production costs. The Organization of Petroleum Exporting Countries (OPEC) isa key player in the side of the supply of crude oil with its 12 member states control about 81% of world reserves of crude oil.Political relations
between OPEC members and other countries in the world play a vital role in determining the amount of oil is supplied to the global economymember countries usually work together to fix the price of crude oil. and determine production levels, which are then taken on crude oil markets worldwideWhen we have sanctions in an oil exporting country, as we have had sanctions in Iran, the supply in the market tends to go down. conversely, when the sanctions were lifted, we are currently experiencing an oil supply glut pushes prices further south.Also, when we have wars in the oil-producing countries, they reduce their production levels and this result in a decrease in the supply of oil on world markets.These factors should be at the top of your mind as a crude oil trader to determine where the world's oil reserves are located in relation to the application for the same product; helping you make an informed decision as to how prices are likely to move in the future.In general, it must be very attentive to market trends when trading in markets for commodities. However, crude oil has its own unique character in that its prices are highly volatile and thus the demand for even more attention to detail than other products.Price movements in oil can sometimes reflect how economies are doing and sometimes influence the fluctuations in the currency markets. It is therefore very important to monitor the demand and supply of black gold strongly to fully capture all the market indicators in your business every day.
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