Compared to cryptocurrencies, oil can hardly be called an attractive asset, but in relation to other tools it is most interesting because the factors affecting it can be counted on fingers. Traders remember quotes for more than 110 dollars. US per barrel, remember, and prices below $ 30. United States.
The advantage of oil is that it is not only an asset, but also a resource, which means there are much less prospects for the appearance of a bubble (unlike the stock market). And if we compare oil with gold, then gold is a defensive asset, oil is the main one. The dynamics of oil prices in Forex are relatively smooth, without protracted recessions (although there are exceptions). You can make money on oil quotes by speculating with futures contracts or using CFDs in Forex.
Forex Oil Price Dynamics: Influencing Factors
Oil is convenient for trade in that it is subject exclusively to the fundamental factors and the law of supply and demand. The asset is quite predictable, technical analysis works poorly here (if there are objections, we invite you to discuss it in the comments).
Factors affecting oil quotes:
- OPEC policy. The task of the cartel is to control the level of production at a level that will be acceptable for each of the cartel members and the largest producers / consumers. Despite the fact that OPEC controls only a little more than a third of world production, agreements with Russia and the United States make it possible to strictly control the market. Statistics on whether the quotas are met by OPEC members, whether production is expected to decline – all this affects the dynamics of oil prices in Forex.
- The level of oil production in the United States. And it is primarily about shale oil, which becomes profitable to produce at prices from 40-50 dollars. US per barrel. The higher the price, the more drilling rigs come into play. The greater the supply of oil becomes and the lower the price of oil. Everything is cyclical until equilibrium is established. Statistics on the increase in the number of installations leads to lower prices.
- Statistics on US oil reserves. Their growth collapses the price, decrease leads to growth. The effect is quite strong. True, the monthly statistics is later revised, which can re-expand the quotes.
- Geopolitics. US and Chinese trade wars, sanctions imposed on Iran, political conflicts between the United States and Saudi Arabia are examples of the reasons why investors tried to withdraw money from futures. The dynamics of oil prices in Forex are negative. Local conflicts can also affect: strikes, civil wars, etc.
- Other factors. Here we are talking about force majeure (accident on pipelines), the privatization of the largest oil company Aramco, etc.
The dynamics of oil prices in Forex, though not very sharp, but predictable. The best strategies are the medium term, calculated for 3-5 days. Intra-day fluctuations are not always so significant as to recoup the costs. Have experience of earning on oil? Share it with FxCash readers in the comments!