Konstantin Boykachev

CEO Proforexea LLC

Honest Coder

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Konstantin Boykachev

CEO Proforexea LLC

Honest Coder

Professional Trader

Blog Post

Factors affecting oil prices

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Dynamics of oil prices in forex

Compared to cryptocurrencies, oil can hardly be called an attractive asset, but in relation to other instruments, it is most interesting because the factors influencing it can be counted on one hand. Traders remember quotes over $ 110. US per barrel, remember, and prices below $ 30. USA.

The advantage of oil is that it is not only an asset, but also a resource, which means that there are much fewer prospects for a bubble (unlike the stock market). And if we compare oil with gold, then gold is a protective asset, oil is the main one. The dynamics of oil prices in Forex is relatively smooth, without protracted recessions (although there are exceptions). You can make money on oil quotes by speculating in futures contracts or CFDs in Forex.

Dynamics of oil prices in Forex: influencing factors

Oil is convenient for trading because it obeys solely fundamental factors and the law of supply and demand. The asset is quite predictable, technical analysis works poorly here (if there are any 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 allow tight control of the market. Statistics on whether OPEC members have complied with quotas, whether a decrease in production is expected – all this affects the dynamics of oil prices in Forex.
  • The level of oil production in the United States. And we are talking primarily about shale oil, which becomes profitable to extract at prices from 40-50 dollars. US per barrel. The higher the price, the more 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. The statistics on the increase in the number of installations leads to a decrease in the price.
  • Statistics on US oil reserves. Their growth brings down the price, while their decline leads to growth. The influence is strong enough. True, monthly statistics are later revised, which may reverse the quotes.
  • Geopolitics. The trade wars between the US and China, the sanctions imposed on Iran, the political conflict between the US and Saudi Arabia are examples of the reasons why investors tried to withdraw money from futures. The dynamics of oil prices in Forex is negative. Local conflicts can also affect: strikes, civil wars, etc.
  • Other factors. Here we are talking about force majeure (an accident on oil pipelines), about the privatization of the largest oil company Aramco, etc.

The dynamics of oil prices in Forex, albeit not very sharp, but predictable. The best strategies are a medium term of 3-5 days. Fluctuations within the day are not always significant enough to recoup the costs. Do you have experience of earning money from oil? Share it with the FxCash blog readers in the comments!

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