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posted on 20 June 2017

Prices On Black Gold Plummet: Is The Future Of Investor Economy Safe?

The experts said it before, oil is no longer the most valuable global resource. This revelation seems to hold water given the current economic atmosphere in the oil market. Oil prices are plummeting dramatically with no hope of rising soon. What does this mean to a potential investor?

Oil prices have dropped again to settle at $46.70 a barrel. This does not sit well with the major oil producing companies under the OPEC umbrella. OPEC members also appear divided on the decision whether to produce more oil or horde existing supply.

On one side, OPEC members like Russia and Saudi Arabia are supporting the agreement to slow down crude oil supply. Saudi Arabia recorded a drop in exports of about 7 million barrels a day. Russia’s export index did not change much even after the OPEC agreement to reduce oil output by 1.8million barrels daily.

Then there are countries like Libya and Nigeria that have raised their oil exports. Libya is boosting oil production in its major fields despite the political unrest in the country. It is also easy to argue that the constant contract disagreements on oil sales Libya keeps saving would slow things down. However, the country is undeterred.

The USA, though a non-OPEC member, also exerts an impact on global oil prices. The USA is famous for its gasoline production whose output index has risen by 10%. This brings their gasoline bpd to an approximate 9.33 million. Of course, such actions would affect the global Brent Crude prices.

With non-OPEC countries and some OPEC members increasing their production, it affects the demand-supply equation. Oil prices have fallen by 12% even though OPEC representatives are optimistic about an increase in production in future. Here is the irony, even with oil prices going south, demand for oil is outpacing supply.

Demand is bound to rise when oil prices fall. This status quo may, however, benefit a selected few. With the US dollar index rising, some countries that do not benefit from the US.DXY index may experience limited access to the current oil supply.

What does this mean to a potential investor?

Should you give up on oil as a trading commodity in the CFD market? Granted, the glaring facts probe your instinct to give up black gold altogether. Even trading platforms like CMC markets are registering a low position margin on Brent Oil compared to other commodities.

On the contrary, this may be the best time to trade in oil as a CFD commodity. There is no direct ownership to crude oil as an asset. This means you have fewer risks to worry about than the oil companies. Even with the oil market facing an economic storm, it is still possible to buy and sell oil as a commodity. By trading in CFD, you are only speculating on whether prices will go up or down. Then you make your profit.

Since the prediction on oil price is a downwards, this is the best time to sell your existing CFDs on oil. This has two advantages for you as a trader. One, selling off existing CFD shares cushions you from an even greater loss on your investments. Remember, it is possible to lose your position margin; therefore, selling is a good choice. You still profit even with a poor performance on oil in the market.

For the investor looking to buy new oil CFDs, the price is just right. However, this is a move only an experienced CFD investor should make. It means you understand price movements, and the factors affecting price, thus you are hopeful about future prices.

No doubts the price of oil will rise in the near future. The current unrest on the oil market will level out as OPEC members come to a clear agreement. It is how the economy works, price always corrects itself to balance supply and demand. Oil prices may oscillate between a rise and fall in future, and this kind of scenario befits the veteran investor.

Conclusion

Oil prices are currently falling, but this does not mean a loss to investors. It is possible to make your profit and control the risk of losing your capital margin. Find a suitable CFD trading platform and take advantage of the current price falls on Brent Crude oil to make money.

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