The Oil Futures Market
Oil is an important raw material used all across the globe. The world sustains on oil and this makes it a highly attractive commodity. Traders buy and sell oil to profit in the oil futures market. Oil has a lot of impact on the financial market and thus if one wants to trade in the oil futures he should be aware of the factors that influence the oil prices.
Oil futures trend
The trend in the prices of oil futures is different than what you see in the stock market. The stock market prices are affected by the earnings of a company. The currency value is dependent on the economic outlook of the country. However, the oil market is much more spread and there is not a single county or a company that can impact the price trend of oil.
This, however, does not mean that it is difficult to trade on oil futures. In fact, many trades trade in the oil future market and make money trading in this asset class. Thus it is actually possible to forecast the oil market prices as well.
The trend of oil prices is also dictated by demand and supply like in any other asset class. It is dependent on the outlook of productivity for the nations of the world. Most of the successful traders watch these factors closely.
Weather and economic scenario
Their are a number of economic reports published and one needs to know which among them will impact the price of oil. The weather reports generate short-term volatility. A warm summer or a cold winter immediately drives the activity in the oil futures market. The purchasing managers’ index or PMI is a rate of the manufacturing expansion and contraction which is also looked closely at.
The major consumers of oil are also watched closely. The number of forecast helps to make predictions about the supply and demand for oil.
Influence of the US dollar
The trend of the US dollar is also watched to predict the movement in oil prices. The relation between oil prices and the US dollar is negatively correlated as oil is priced in dollars.
The market environment that supports US dollar negatively impacts the oil prices. So when there is a scenario that is positive for dollars then you short the oil futures. When things are negative for the USdollars then you go long on the oil futures.
It is important that one is aware of these correlations in the market before entering into a long-term position in the oil futures market. Learn more about it and the factors that affect the oil future prices.