Definition And Facts about Crude Oil

The oil market has a huge impact on the global economy. The well-being of oil-producing countries and oil-consuming countries depends on it. The market is also very useful for investors. What do you need to know to make money from oil? We tell

Petroleum is the best-selling raw material in the world. Petroleum product supply contracts are one of the most popular trading tools. But in order to successfully trade this asset, you need to understand how the oil market works: understand its structure, factors that affect price formation, and so on.

Oil buyers and sellers

Oil is valuable because of what the market needs to produce from it—fuels and petroleum products. The main demand for oil is created by fuel buyers-industry, power plants, transportation. If transportation and production increase, then the demand for oil will increase-which will lead to higher prices.

With industrial decline, reduced traffic, and warm winters, when power plants do not need to burn a lot of fuel, oil prices will drop.

Oil prices determine the relationship between supply and demand. Supply and demand are affected by many factors-from the global economic situation to wars and oil facility accidents. In addition, prices may fall or fall due to reasons that affect investor psychology. For example, due to analyst forecasts.

How and where is oil traded?

For a long time, oil transactions have been concluded in the form of direct long-term contracts. The long-term nature makes it possible to avoid the inevitable price spikes when demand is cyclical. In the 1970s, at the height of the oil crisis, there was a two-day oil supply contract.

Oil began trading on the exchange in the 1980s. Now, when people talk about oil trading, they often talk about futures, that is, contracts for buying and selling oil that are settled by futures.

Futures prices change with changes in supply and demand, and oil producers are allowed to insure, and investors can simply profit from price changes.

The main product of ICE futures in the European oil market is Brent futures. ICE Futures Europe also trades WTI settlement contracts (Texas Light Sweet brand). This market is part of the Global Intercontinental Exchange (ICE) Group. It accounts for approximately 50% of the world’s petroleum and petroleum product futures trading volume.

How can an ordinary person trade in oil?

With the advent of futures, almost everyone has the opportunity to invest in black gold and profit from changes in its price. Now all you need to do is to have a personal computer or mobile phone with internet access, and you can become an oil investor or trader. To do this, you need to register with an online broker that provides access to oil transactions and complete the transaction.

Of course, if you want to make a profitable transaction, you cannot do without a comprehensive analysis of the market situation, because you need to correctly judge the future direction of oil prices.

Click here to see what options individuals have to make money on oil.

Crude Oil futures.

Many people are willing to make money by buying and selling oil. For example, if they had to come to Kuwait, fill a tanker with a full tank of crude oil, and then take it to the other side of the world to sell to potential buyers, then only a few people would be willing to do so. Agree, this is a costly job, both in terms of time and money.

Therefore, the oil futures-buy/sell contract was invented, which will be executed in the future at the price set now and fully corresponds to the actual price change of oil.

By purchasing such a contract, the buyer actually becomes the owner of a certain amount of oil, but he does not need to actually transport and store the oil. At any time, he can sell futures at the current market price.

Trading Crude oil on binary options

For beginners who want to make money from oil, binary options are also a good choice. This is why:

• Binary options are the simplest type of transaction. Here you only need to guess the direction of asset price movements.
• Binary files have the lowest deposit threshold and transaction amount. You can start trading black gold from 10 USD and bet 1 USD in each trading session.
• Usually, BO brokers have no spreads.
• You can make money quickly and in large amounts. Unlike exchange futures and foreign exchange, you need to wait for the expiration of the contract and the end of the time frame, where you can set a time period of a few minutes. After completion, if your prediction is correct, you will immediately get a profit equal to 70% of the bet in some cases.

There is another important point here. The binary options market is technically simpler than the foreign exchange and stock markets, which has led to the emergence of a large number of unprofessional and even outright fraud companies in this field recently. In short, some dealers just want to “buy shoes” for customers who are easily deceived. By finding such a broker, you have a 99% chance of losing money.

Therefore, you should carefully choose a broker for BO trading. There are some valuable companies in the market that have confirmed their reputation through time and traders’ comments.

Asset features

Crude oil is a non-renewable resource, and the quantity on the earth is limited.

As the most valuable exporter, Saudi Arabia is also one of the largest oil producers in the world. Middle Eastern countries and OPEC member countries account for 12.4% of oil production, second only to the United States. Compared with its competitors, the United States uses more oil domestically and exports less. The value of U.S. exports is about half that of Saudi Arabia.

Oil demand usually has predictable seasonal fluctuations. Due to the increase in the number of tourists during the summer vacation, the demand in spring and summer has risen. Demand declines in autumn and winter. Although fuel oil consumption increased in winter, it was not enough to make up for the decline in gasoline demand after the holidays.