The Volatility of Oil Prices
The price of oil has always fluctuated greatly. It is one of the most volatile commodities that you can get your hands on. It is true for the 2016 calendar year so far, as well as each year for the past several decades. The volatility of the price of oil is due to the world’s dependency on it, combined with the number of factors that affect the price.
Oil is in high demand around the world and the cost of it can be easily changed in an instant. The world’s dependency on oil only serves to accelerate this process. Something that positively or negatively impacts the cost of oil will tend to result in a more dramatic swing in the price of it as a commodity relative to other commodities such as corn or iron.
Oil Prices in 2016
In 2016, the price of oil has fluctuated with even more volatility than in years past. It has seen lows of around $26 per barrel in both January and February. It reached a quarterly high of $42 per barrel in March. Since then, it has shot up to a yearly high of $52 per barrel in June and has been hovering between $40 and $50 since then.
Going from a low of $26 per barrel to a high of $52 per barrel is quite a dramatic change. This happened in the span of only a half of year. The price of oil is expected to continue to jump around on and off like this.
What Impact Do the Price Changes of Oil Have?
Since we rely so heavily on oil, any sudden change in price will have a trickle-down effect that will spill over into our economy in a variety of ways. The US is a major importer of oil. When oil prices are high, it has a negative effect on the US currency exchange rates. Likewise, the US dollar is strengthened when oil prices are low.
What is Driving the Price of Oil?
At around $40 per barrel at the end of 2015, oil was at an unanticipated low price. The driving force behind this is the high supply and low global demand of the boil. China, in particular, has worked to significantly decrease their dependency on oil. At the same time, Saudi Arabia continues to export as much oil as they can.
This is only driving the price of oil down further. Saudi Arabia is doing this knowing that they’re contributing to the drop in oil prices. Their aim is to keep small time oil producers out of business. If they flood the global supply with oil, there is not going to be a lot of room for others to take a share in the market.
Instability in the Middle East has caused oil prices to remain stationary. For this reason, some experts are predicting that the cost of oil will stay low.
Volatility in Oil Prices
With such uncertainty, it will always contribute to periods of volatility in the price of oil. These create great opportunities that short-term traders can take advantage of. They can go long when the price is low like it is now and sell it for a profit. Likewise, they can short oil once it reaches its highs once more. A smart investor will be able to tell the trend and should have an easy time identifying the high and low points as the price fluctuates. In the short term, for now, is expected to stay low. As long as its volatility is dampened, it is only delaying the opportunities that short-term traders would otherwise have.
If you are able to identify the opportunities that fluctuating oil provides, there are several different types of positions that you can take. Online oil trading, in particular, will provide investors with cutting-edge software to analyze data and identify the right spreads to attack. They will be able to leverage their trades at up to a 100:1 ratio. This will allow investors to maximize their returns and take full advantage of every opportunity that presents itself to them.
This platform will allow you to participate in oil trading through CDFs and ETFs, you will be able to take different positions based on the spread amount each day, and it will allow you to leverage your options trading and futures, and place trades on margin. There are countless ways that you can use to profit off of online oil trading.
If you do decide to pursue online trading, we recommend that you pay close attention to your investments. While the 100:1 leverage ratios that are available and accelerate your profits, they can also lead to larger losses. Please always be responsible with the money that you are investing.