Oil is an important global commodity. Owing to its international commodity status, the prices of oil play a major role in the trading industry. Many nations rely upon oil trade and the fluctuation in oil prices impact deeply their economic strength. Several factors are responsible for the fluctuating oil prices, few of which occur any time of the year. Once we understand these driving forces, no matter what the current scenario, it will be possible to work towards maintaining a healthy economy as well as trade oil daily, thus benefitting from the oil industry.
- Demand and supply are prime factors in any commodity trading. Nations with the highest production of oil are likely to benefit more in the oil trade. Saudi Arabia accounts for over one tenth of overall oil production, with around ten billion barrels of oil produced daily. Besides exporting this asset, the oil producing countries keep a sizeable reserve for their future usage.
- Demand for oil from other countries also play a crucial role in deciding the oil prices. In emerging economies, the Nations rely upon oil for their automobile and machinery operation. This demand from emerging economies often determines the price of oil.
- Meteorological events have affected global economy since many years. Severe storms in oil producing regions affect the cost per barrel and those who trade oil daily. Lesser production of oil affect the pricing of oil to make up for lost inventory.
- Political issues often disrupt the regular supply and demand of trading commodities, especially oil. These political issues can drive up oil prices and bring down the trading scenario.
It is always advisable to trade oil with only experienced agencies or traders. Since oil is a commodity that is subject to many price differences owing to several eventualities that cannot be predicted, it becomes a risky investment for many. Professional traders often suggest their clients to concentrate on a few commodities rather than investing in one. Diversifying your trading futures on commodities is like diversifying your stock portfolio. Even if one community does not do well, the other might help you survive through. A balanced portfolio of commodities often proves profitable eventually.
It is always best to trade in commodities you know the most about. If you are new to the trading commodity industry, take help of proficient trading agencies or traders who have been in the business since quite a few years.