Crude Oil - A Report Brought to You by Q8 Trade
Oil is a natural substance that is extracted by geological formations in the ground which may be collected through a slow process of organic transformation that has persisted for many years and decades.
Chemical oil is a complex mixture of hydrocarbons whose shape, color and composition vary according to where they are extracted.
A brief overview of oil and its investment importance
Oil is a natural raw material extracted from the surface of the earth. This also called crude oil. Crude oil is then refined into various types of petroleum products, technically a process of retail distillation that separates it into a mixture that distinguishes between them.
The fossil, because it forms under the deep layers of the earth from large quantities of rare organisms such as zooplankton and algae which are buried under sedimentary rocks and then dissolved by the absence of oxygen and high pressure and temperature below the surface of the earth.
Crude oil, also known as black gold, is a liquid substance with a density ranging from black to green and is considered flammable. Oil is extracted from the upper layers of the earth’s crust in special ways and the types of oil vary depending on where they are extracted. The difference is very different in composition and appearance.
Oil is a major source of energy and the most valuable because of its economic importance. The world is a consumer of crude oil, as it uses it in many sectors and fields such as fuel cars, jet fuel, factory operation and operation of machinery. It also used for many chemical industries, fertilizers, fabrics and medicines.
Moreover, paraffin in the early days of the oil industry in the late nineteenth century is largely classified as the main producer of refineries.
In the refining of paraffin from crude oil, the industry produced more oil that could be used. So the refineries were getting rid of most of the oil and people were using small amounts of oil, which was then used for stoves in cooking pots.
The mass production of cars, which began in 1908, increased the demand for oil to a large extent. In the early 1970s, oil refiners faced difficulty in meeting the demand for oil. Wars and some unrest in the Middle East have reduced oil production and many countries have reduced speed limits and encouraged people to use public transport to save oil.
The world’s limited supply of oil has intensified efforts for the oil economy including the production of smaller cars with economic engines and such efforts have recently reduced the demand for oil, helping to eliminate the acute shortage in the 1970s.
How to determine the price of crude oil?
The main factors of the global oil market that determine oil prices are market supply and demand, the psychological state of the market, the number of stocks in the market and the global economic slowdown. The concept of supply and demand is that as demand increases (or supply decreases), the price should rise. With lower demand (or increased supply), the price should fall.
The price of oil is determined in the futures market. Oil futures are a binding agreement that gives the right to buy a barrel of oil at a predetermined price and at a predetermined date. Under futures contracts, both buyers and sellers are committed to achieving their side of the transaction on the specified date. Unlike most products, oil prices are not entirely determined by supply and demand and market sentiment towards the actual product.
The supply, demand and psychological state of oil futures, which are heavily traded by traders, play a dominant role in determining prices. Periodic trends in the commodity market may also play a role. Regardless of how the price is ultimately determined, based on its use in fuel and countless consumer goods, it seems that oil is in most cases in a state of increased demand.
The United States imposed sanctions on Iranian and Venezuelan oil and the escalating trade war between the United States and China, unlike the United States’ imposition of customs duties on Chinese imports worth $200 billion, led to the imposition of the latter on US goods and products worth $60 billion beginning in May 2019 and coinciding with the escalating trade war.
Oil prices have suffered heavy losses for the first time in almost six months amid a recession in the markets due to the escalating US-China trade war and fears of a global economic slowdown.
Is crude oil trading profitable?
Crude oil trading is abundant all over the world so the oil market is characterized by liquidity. It is one of the most important liquid investments currently available because there are large amounts of trading experienced every day and all your investments can be transferred to easily criticize anytime and anywhere in the world.
What factors affect oil prices?
One of the most important factors affecting the price of oil is the cost of production. In 1859, the first well was drilled at a depth of 39 feet for extraction of oil in waters that were about 5,000 feet deep. During that period, the cost of these land wells was very low. The cost of the offshore dredger during that period was almost half a million dollars a day.
The second factor is supply and demand. Oil is the same as any other commodity that changes according to the market and the fluctuations of the global economy.
The third factor is the speculations that occur in the oil markets when the direct sales moved from producers to the Wall Street market and to the professionals who invented paper oil. The latter is the policy that plays an important role in determining world oil prices.
Oil prices rose in 2018 and reached their highest level in four years before falling more than $30 a barrel again due to US sanctions on Iranian oil, OPEC’s bid to increase its oil production and the uncertainty that controls it. The Organization of the Petroleum Exporting Countries (OPEC) said that it is seeking to reduce its oil production during the current year because of weak demand for crude. The organization also expected that the demand for crude this year will decrease by about 100,000 barrels per day.
In addition to the uncertainty that China will not win the trade war, one side could suffer more than the other. This seems to be the case for China where the slowdown in production and GDP growth prospects seem discouraging. Chinese equity markets gained the worst stock market status in 2018 largely due to the trade war.
In 2018, China reduced its imports of US energy supplies to less than 100,000 barrels per day (bpd) from 430,000 bpd. If Beijing recovers the energy it imported from America in March 2018, it will add about 12 billion US dollars in revenue to the US budget.
Should China stop importing any point-based supplies, it would have bad consequences for US revenues for which China is an important buyer of crude oil.
However, before deciding which currency pair you would like to trade, we highly encourage you to learn more about what would you get from the platform that you choose to trade with and what are the advantages you will be getting from choosing a certain platform over another.
What are the concerns that dominate the market on the demand for crude oil?
Some newspapers have said investors in the bull market have been monitoring several factors that modify expectations from crude demand. The latest drop in oil prices was caused by tensions, the escalating US-China trade war and concerns about slowing global growth which certainly reflected on the demand for crude oil.
A newspaper showed that other factors related to the future of the oil market and the fears that dominate investors start from the extent to which the quota system approved by the Organization of Petroleum Exporting Countries (OPEC) will be applied earlier in 2018 to stabilize the market and balance after the significant decline in oil prices.
The newspaper added that after the decision of the organization to reduce production, the United States of America pumped more oil than ever in its history and thus became the world’s primary producer of crude production, topping the forefront of Russia and Saudi Arabia.
What are the advantages of oil trading via CFDs?
CFD or contracts for difference is a contract between the two main parties in any transaction, namely the seller and the buyer. The value of the contract shall be based on the value of the underlying asset at the end of the contract or at the end of the transaction at the discretion of both parties.
If the value of the underlying asset exceeds the price at which the transaction commenced, the seller shall pay the difference between the current price of the asset and the agreed price. The buyer pays the difference between the base price of the asset and the current price.
CFD is a powerful instrument of financial trading where it enables the possibility of profit through the movement of the value of the underlying asset where it is possible to open positions of purchase through the change in the value of the asset depending on many factors affecting the higher prices moved upward or moved downwards.
Contracts vary according to the change in the value of the underlying asset and the change of the underlying factors at the same time. However, CFDs are the best instrument of financial trading and have many advantages over other instruments.
Like any other contract, CFD contracts carry profit and loss when buying or selling assets but they offer ample opportunities to trade on real assets and profit without having actual ownership of the instrument to which the contract is to be made.
Let’s make an example:
When you intend to invest in crude oil through CFD trading, you can invest in oil and you can profit from it without buying a barrel of oil and placing it, let’s say in your home. Oil trading comes through CFDs through several steps:
- Choose a financial instrument. For example, if you want to trade crude oil, if the price of a barrel of oil is $50, the oil contract equals $50.
- Choose the size of your deal. Through the use of leverage, you can buy oil more than one time of the amount of investment in the transaction. If you want to invest $100 you can buy oil contracts worth $20,000 through the leverage of 1: 200.
- Choose the type of deal, when trading CFDs you can profit even if you think the price may decline.
- Close your page and make a profit and if the price of oil fell to $49 and you want to close the deal at $49, it means that the value of the change from the opening time until the close of $1 per barrel. Because you invested $20,000 and the barrel was priced at $50, you bought 400 oil [($ 400 x 1) = $ 400 profit] although you invested only $100 thanks to leverage.
Why should you trade crude oil with Q8 Trade?
- Q8 Trade offers the opportunity to trade oil through CFDs which ensures that profits will be achieved even if prices fall.
- The leverage can be used to increase the value of the amount you trade when you trade with Q8 Trade.
- Q8 Trade offers the ability to trade in crude oil free of charge through CFDs because you do not really own the underlying asset.
- Q8 Trade has many tools that you may need during oil trading such as real-time prices, historical charts, oil news which may affect its performance, live charts, technical analysis and more.