Some exciting methods to analyze the oil trading market

The oil trading market presents a very different playing field and dynamic than other financial markets. Many platforms offer features like accurate and précised strategies for becoming an independent trader for oil trading using bitcoin. Moreover, you will get live customer support. To get an edge in this challenging trading environment where liquidity is low, and traders are few, it’s essential to understand the factors that can offer a trader an advantage.

The NYMEX exchange publishes data on all trades to provide insight into trends that might be developing. In addition, the NYMEX holds its monthly crude oil contract auction twice a year for delivery for three consecutive months. These contracts allow you to make changes before expiration dates without paying extra fees – something not possible with traditional commodities like grains or metals.

Oil trading can be a great profit maker, but it’s not all about buying the contract at a low price and hoping it goes up. Instead, the successful trader should look for the following conditions to put them in an advantageous position, and it will assist you in robustly analyzing the market. 

1. Supply and Demand:  When oil supplies are plentiful relative to demand, prices fall. However, prices also rise if demand rises faster than supply is replenished. It is one of the main reasons investing in oil futures contracts involves additional considerations beyond just supply and demand fundamentals.

2. Speculators: A large speculative bid is a positive for the oil market and tells you that traders are confident in additional demand growth, which can drive prices higher. But a sizable speculative stop (sell order) means there is something for you to worry about. It is one of the main reasons why speculators’ positions should never be neglected in analyzing an oil futures contract.

3. (Low) Liquidity: Low liquidity makes it difficult for you to execute a trade efficiently and at a low cost. You must pay a spread or fee for every tick on your trading platform.

 4. Geopolitical events: The conflict in Ukraine, the Middle East war and other political turmoil have pushed oil prices up. It is especially true after the U.S. and Europe’s sanctions against Russia. In addition, if supply increases faster than demand, this decreases prices. But supply is only one of the factors that can affect oil prices; there are other things that traders should be aware of as well, like production levels and storage capacity, amongst others.

6. (High) Inflation: Higher inflation means higher energy prices or, in other words, higher oil prices. Just like with other commodities and goods, inflation creates demand for goods and services that ultimately move price levels higher.

7. Seasonality: Some analysts believe that oil futures prices will experience seasonal price volatility during the spring season, typically peaking in February and March, falling in April, May, and June and then rising until August or September, when they again begin to fall off.

Other analysts believe oil prices will fall during the summer season, typically peaking in July and August, fall in September, October and November and then rise until January or February, when they again fall off.

The above factors provide an overview of how to quantify the behavior of the oil futures market. Other aspects also determine which way the price will go. The trading range is one of the most important indicators for traders. The closer a price is to the high or low end of the trading range, the greater its volatility. The longer it stays within that range, the greater this volatility.

Adoption of blockchain technology in oil trading:

Recently, the adoption of blockchain technology in oil trading has come into consideration, and it is believed that the technology will redefine oil trading if fully implemented.

For using blockchain technology for oil trading, points of interest include a securities settlement system, opening up new markets and improving operational efficiency. Oil companies worldwide have been investing heavily into developing new technologies that can have a use case in their daily operations. As a result, the demand for blockchain developers with data analysis, cloud computing and cybersecurity skills to create bespoke solutions has increased by over 200% over the past year alone.

Huynh Nguyen

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