How to make money on the oil price?

How to make money on the oil price?

We constantly hear in the news about fluctuations in oil prices, which sometimes reach tens of dollars a day. On the one hand, this is not a very clear mechanism, and on the other hand, it is a great opportunity to earn money through speculation, if you look into it. Investors are thinking: how to invest in oil?

There is no formalized way, but there are a number of points that can help predict future movement. And this, in turn, will allow you to enter the market and earn. Now almost everyone has the opportunity to trade, so everything is in your hands.

Business cycles

Firstly, it is worth noting the natural factors that affect the cost of black gold. The main one can be called the usual economic cycle, which consists of two phases:

  • Stimulating the economy is carried out by lowering rates and injecting funds. The simplest example is QE in the USA.
  • Cooling of the economy. The reverse process, in which inflation falls, demand and overall performance fall.
  • Usually accompanied by an increase in rates.

When the economy grows, the demand for resources increases, including energy carriers, this method is also affected by the approach to how to make money on stocks. As a result, prices start to rise. Oil-producing countries are emerging from a period of low incomes and possible shortages, so they are in no hurry to increase production and let the price rise quickly. There are a lot of such examples, and it is growth that is considered the best way to make money on the oil price. You can conduct a fundamental analysis of stocks and raw materials in parallel, they often move together.

Speculation on the news

Geopolitics plays an important role in shaping the price of oil. A drop of literally 1-2 million barrels per day could trigger moves of several dollars. The market is so balanced that the increase or decrease in production is carried out with an accuracy of tens of thousands of barrels, with a total world consumption of about 100 million barrels per day. Therefore, you can track the news of the oil market, data on reserves, and all those events that relate to countries that extract the resource.

You can also consider such an option as buying shares of mining companies, in an unstable environment they can move after oil by whole percentages. Let’s highlight the main points:

  • directly mining and performance changes due to different situations;
  • news about a possible embargo or the start of supplies;
  • logistical problems;
  • environmental problems.

All this can affect quotes, any imbalance has consequences, and such events do not play back during the day. Most often, it takes whole weeks or even months. Futures with different expiration periods can help determine the long-term trend. There are contracts for several years ahead, but futures up to 18 months ahead of the current date are considered the most relevant.

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