Oil plays a significant role in the international economy, though governments across the world are making efforts to find substitutes in the form of renewable energy and hydroelectricity to reduce its use. Demand and supply are the main factors driving oil demand. Production costs like extraction and manufacturing also play an essential role in determining the price of oil.
The Role of Hedgers and Speculators
Speculators, who bet on the prices of oil, and hedgers, who reduce the risk in the consumption and production of oil, play an essential role in the oil markets. OPEC somewhat controls the oil supply. The oil demand is influenced by factors like airline travel, cars, and electricity generation.
Everyone thinks that the prices of oil should come down when demand is weak. It is not the same. Oil prices are set by the oil futures on the commodity market. You can get into commodities trading with the help of David Goodnight from Austin, Texas, and amass huge profits.
The binding agreement of a futures contract gives you the right to purchase oil in the form of barrels at a predetermined price and date in the future. Under the futures contract, both the seller and buyer are bound to fulfill their sides of the transaction on a specified date.
The participants in the oil markets
Hedgers and speculators are the two participants in the oil markets across the world. For more clarity, the hedger would place a purchase order for aviation oil futures to protect against rising oil prices. On the other hand, the speculator forecasts the future direction of oil prices but has no desire to buy them. Speculators dominate the futures market, and taking possession of commodities by the futures contract buyer is less than 3%.
The sentiment is another factor influencing oil prices. Some feel that the price of oil will significantly increase in response to the expected demand in the future. Such beliefs influence the price of oil to rise in the current market. Therefore, hedgers and speculators put their bets accordingly on the oil futures.
The sentiment can also move in the reverse direction. For example, some feel that the price of oil will decline in the future because of several factors affecting demand negatively. So, you can sell the oil futures at the current market rate to cover your position and make a profit when the oil price drops. You need to know the market trend to profit from trading futures contracts. David Goodnight from Austin, Texas, will provide you with the latest news and direction of the market to enter and exit the market at the right time.
Geopolitical factors influencing oil prices
Around 40% of the oil supply across the world is controlled by OPEC. Therefore, the cuts in oil production as instructed by OPEC would increase the price of oil. You will receive such news in advance, and accordingly, trading strategies can be changed to maximize profits. In addition, the broker will send you tips based on the latest trends shown in the charts. You can also utilize such information to trade accordingly and amass huge wealth from commodities.