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5 Factors You Should Consider Before Investing in Crude Oil

Posted on 06th July 2018
5 Factors You Should Consider Before Investing in Crude Oil

If you have been considering trading for some time, then you couldnt have missed crude oil as a commodity. It is highly matured, but also highly volatile. There are numerous factors that impact the price of crude oil, but here are the ones that make the price go abruptly up or down.

Know What Propels Oil:

Just as every commodity, oil's prices are determined by the global supply and demand. Surplus resource for fewer consumers is when the market takes a dip, and it gains value when the opposite becomes true. The demand also increases when the consumption increases although the production remains the same.

Global Ties and Politics:

Keep your ears open for the international news. Countries with renewed agreements and severed ties affect oil markets directly. Also, keep track of your country’s major political changes, the introduction of new taxes and levied customs duties for fluctuations in the market.

New Geological Discoveries:

Yes, we are drilling oil from almost every reserve we have found. But there still could be massive reserves of oil whose discoveries could lead to surplus supply. Also, our proven wells can go dry anytime leading to an increase in demand. Although it is unlikely to find reserves of oil, it is one scenario where the prices can stoop abruptly low or rise high.

Flourishing Eco-friendly Inventions:

Vehicles are one of the major consumers of oil. Increased economic growth led to increased number of vehicles on the road creating a demand for oil. But today, economic e-cars are no longer a fiction, and harnessed solar power is within our reach which could create a whole new market for itself.

Take a History Lesson:

Have a look at the yearly charts of crude oil and try to figure out the reason that could have led to a rise or a fall. Identify the agreements between countries that reduced the price of oil. Identify how global politics and oil prices go hand in hand. It could give you some idea of how the oil market works.

Wrapping it up:

Investing in Crude oil has its own benefits. As the market is highly volatile, opportunities for quick profits are high, but on the flip side, you can suffer a substantial loss. Critical analysis and a well laid out plan is a must to generate profits subsiding your losses.