How to Trade Oil
- By FXT
- January 11, 2023
- FXT Analysis
Have you considered trading oil? The world’s most traded commodity brings some inherent trading edges you can consider in your next move.
When you look at trading as a tiered structure of probability, the concept of trading oil becomes more interesting and there are ways to find your edge by focusing on an asset class. In trading, knowledge is power, so powerful that using inside knowledge is banned. Publicly accessible knowledge is completely legal to trade on, but many traders don’t take advantage of it. Authorities are effectively stating that knowledge is an advantage, so using what you can is critical.
The Evolution of Trading Specialization & How You Can Use it to Your Advantage
1. Raw Price Data: traders see a chart and a price with no understanding of the underlying asset. Effectively trading blind, some traders still find some luck in their decisions based on price action and technical analysis.
2. Economic News: Events like covid, travel restrictions, OPEC announcements, economic and political unrest can spark interest in oil price movements in a particular direction and increase volatility. This adds an additional layer of insight into trading oil.
3. Fundamental Understanding: Oil has a range of characteristics that can create a trading edge, from trading at specific times of day and days of the week, looking for seasonal patterns and inherent nature of oil.
4. Deep Dive: Global storage, geopolitical purchasing and sales of oil, production and usage add an additional layer to trading oil that can help to envision where price could be moving and determine what factors are likely to impact the market.
Climb Your Way Up the Trading Edge Pyramid
Can you work your way up the trading pyramid? Educate yourself and stay up to date on oil topics and master the craft of trading oil.
Lift yourself from the bottom and bulky section where most traders exist and enjoy the edge that specialised knowledge brings. Keep reading, use the resources and grow as a trader.
Interesting Facts About Oil Trading
- Oil is the world’s most traded commodity, with an average of more than 33 million barrels being traded every day.
- The largest oil trading hub is located in Singapore, which handles around 12% of the world’s oil trade.
- The two most actively traded oil futures contracts are the West Texas Intermediate (WTI) and the Brent Crude. The WTI is traded on the New York Mercantile Exchange (NYMEX), and the Brent Crude is traded on the Intercontinental Exchange (ICE).
- The value of oil can be highly volatile, and is influenced by a wide range of factors, including global political events, economic conditions, and supply and demand trends.
- Oil traders use a variety of strategies to try to profit from oil price movements, including taking long or short positions, using futures contracts, and engaging in hedging activities.
The Organization Dealing with Oil Supply
The Organization of the Petroleum Exporting Countries (OPEC) is an intergovernmental organization of oil-producing countries that was founded in 1960. The organization’s primary objective is to coordinate and unify the petroleum policies of its member countries, in order to secure fair and stable prices for petroleum producers, and a reliable and adequate supply of petroleum to consuming nations.
OPEC has 14 member countries, which include: Algeria, Angola, Ecuador, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela. These countries together control a significant portion of the world’s oil reserves and production.
OPEC operates through a series of meetings and committees, in which member countries discuss and agree on policies related to oil production and pricing. The organization also engages in dialogue with non-member countries and other stakeholders, and conducts research on a variety of topics related to the global oil market.
When does OPEC meet?
The OPEC Ministerial Conference typically meets twice a year, in June and December. These meetings are held at OPEC’s headquarters in Vienna, Austria, and typically last for one or two days. The conference is attended by the Oil Ministers of each member country, as well as other senior officials from member countries and other stakeholders.
In addition to the Ministerial Conference, there are a number of other committees and working groups within OPEC that meet on a regular basis. The frequency of these meetings can vary, but they are typically held at least once or twice a year. For example, the Economic Commission Board (ECB) meets every two months to discuss economic developments and their impact on the oil market, and the Research Division conducts research on a variety of topics related to the oil industry on an ongoing basis.
Where Can I Find Information on Oil Supplies for Countries?
There are a number of sources of information on oil supplies for countries. Here are a few options:
- The International Energy Agency (IEA) publishes regular reports on global oil markets, including data on oil production and consumption for individual countries. You can access these reports on the IEA’s website (www.iea.org).
- The U.S. Energy Information Administration (EIA) also publishes data on oil production and consumption for countries around the world. You can find this information on the EIA’s website (www.eia.gov).
- OPEC, the Organization of the Petroleum Exporting Countries, publishes data on the oil production and reserves of its member countries on its website (www.opec.org).
- The BP Statistical Review of World Energy is another source of information on oil production and consumption for countries around the world. You can access this report on the BP website (www.bp.com).
- The World Bank also publishes data on oil production and consumption for countries around the world. You can find this information on the World Bank’s website (www.worldbank.org).
The Informational Edge in Oil
With all of this information, you have access to more insights than many traders are using. Remember, in trading, knowledge is power and some knowledge is classified as being too powerful and becomes banned. This means that authorities believe that knowledge does create an unfair advantage, an edge. Publicly available information is of course legal, but so many traders do not use any of this, outside of current events and news announcements. Give yourself the leg up and use the resources available to you to give yourself the advantage.
How To Trade Oil Forex
Trading oil is as simple as creating an account with FXTRADING.com and buying or selling the oil commodity. Trading oil is very similar to trading forex, it is traded as a CFD (Contract for Difference) meaning you can earn from a rising or falling price of oil depending on your position (long or short).
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