Important Guide About Oil Trading

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One of the best commodities to trade in the market is the crude oil. It belongs to a very active market and it is popular among traders and investors. News about this commodity is abundant and it causes the oil price movements every day. Thus, it showcases many trading opportunities for day-traders and long-term traders alike.

It is a valuable commodity and it has marked its importance to mankind. This commodity is the main asset of many global industries. It is a major source of energy. It generates electricity, provides power for transportation, and allows factories to function. Therefore, oil price movements can affect many other assets such as bonds, currencies (forex), stocks, and in special cases even other commodities.

Developed industrial countries are the biggest consumers of this commodity. China, Japan, Germany, U.S., and the UK are one of the largest consumers. Its price is determined by supply and demand factors. When demand increases, its price will also increase. While a decrease in demand will also decrease its price. Thus, it is important to pay attention to these big oil-consuming nations, regardless of the commodity’s demand status.

Traders should be aware of various reports when they trade this commodity. The first one is the weekly oil inventory of America’s Department of Energy (DOE).  This report presents the supply that is available for the market. Whenever the supply is high it implies that there is less demand in the previous week, making the price to fall. When the supply is low, it implies that demand is high which results in a higher price.

The second one is the annual report of the Organization of the Petroleum Exporting Countries (OPEC). This report presents the production of each representing countries. It checks how much supply is going to be produced for the world market. OPEC’s production will depend on the status of the world’s supply and demand. For example, if supply is low then OPEC will increase in production, resulting in low price. Traders must know of the influence the OPEC has in deciding the oil price.

Another component traders should pay attention to is the U.S. dollar. This currency is used for pricing oil. This commodity and the U.S. dollar has an inverse relationship. A lower price of dollar means a high oil price and a lower price in oil means a high price of dollar.  

Crude oil is a special asset it requires exceptional skills to make a profit out of it. Newbies who are looking to trade this commodity must learn what moves it, its crowd, its history, and different physical variations. Trade oil with us, here in Millennium-FX.

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