Who to blame for crude prices?
The blame game started again with the rise and fall of crude prices over the past weeks. If you have not noticed or been away from the crude market lately, crude prices have managed to touch the $40 a barrel. What if prices go down again or what if crude master players do something magical for prices to soar up again? Yet another crude story, but let me change it.
With an on-going fall in crude prices since last year, investors had almost lost hope to ever see any rebound in crude prices soon. However, prices are edging up and to their great surprise the $40 a barrel has been crossed this year. You might be surprised, as just some months back I was really bearish about crude prices, but the magic did occur. But who did it? How did it happen? Will it sustain? Let us go through crude prices again and let’s peep into the financial opportunities that may await you traders in binary options trading!
Let bygones be bygones?
Production freeze? OPEC meeting? Or just too many forces to handle? Well, In my opinion there are too many stakeholders in this matter which has with time changed the course of crude prices over time. Fluctuation of prices has kept the market quite buoyant over several months, but kept a high suspense on a probable hike or fall. However,reaching $40 a barrel at the start of this year seemed to be a kicking start for crude, increasing hope for a further hike in prices. Last year’s bearish prices caused binary options traders to opt for safe haven assets instead of crude so as to play safe in the trading arena. Still, the pertinent questions remain will market sentiment change again?
If crude prices have been pushed up by market sentiment lately, then they can very quickly come back to trade in a weaker range of $35 - $30 a barrel! Yes, this may also occur since many analysts and investors have concluded that recent gains in crude prices were mostly driven by market sentiment. Hold on! that is not the bottom line. Market sentiment can be high, but there are many additional factors that have together played an important role in pushing prices higher. So the past may not be completely forgotten since crude prices were weak a few weeks ago. The whole scenario for the future remains bleak.
A retrospective into crude oil prices in 2015
Extract of the first three months of 2015 Brent (UKOIL) VS WTI (USOIL)
|$52.86 as at 1st January 2015||$56.77 as at 1st January 2015|
|$47.58 as at 31st March 2015||$55.13 as at 31st March 2015|
|$47.50 as at 1st April 2015||$55.18 as at 1st April 2015|
|$59.00 as at 30 June 2015||$63.21 as at 30 June 2015|
|$58.96 as at 1st July 2015||$63.22 as at 1st July 2015|
|$45.33 as at 30 September 2015||$48.47 as at 30 September 2015|
|$45.29 as at 1st October 2015||$48.48 as at 1st October 2015|
|$37.48 as at 31st December 2015||$37.74 as at 31st December 2015|
A look at this chart shows that there has been price disparity between most traded crude benchmarks which makes me think should bygones really be bygones? Now that prices are seen up, will they come down as shown on the charts above. I would like to keep options opened on this matter, since I guess it is too obvious that prices have fallen way too many times to not let it affect our trades. Indeed, hoping for crude prices to soar back is not forbidden, hence let us go through the current situation and evaluate whether this sudden rise can be further trusted.
Deal to freeze current crude supply
OPEC and other major crude producers are expected to meet in order to find ways to control the current oversupply. Binary options traders have been eagerly waiting for so to occur but as the news was made public, crude oil prices began to soar higher. Much speculation revolves around this meeting which many traders were not aware of.
On April 17 2016, the famous meeting of major crude producers is scheduled in Doha, Qatar. This step is expected to support crude prices and investors deem this rise in price as a result of this upcoming meeting. The meeting will comprise of 15 countries, which includes Saudi Arabia and Russia who accounts for almost three-quarter of the global output. In February, Russia, Saudi-Arabia, Venezuela and Qatar decided to freeze production in guide to normalize crude oil prices. A picture very much different to what was portrayed last year. Iran, a crude producing country, also joined hands in this endeavor but needed to wait until its crude exports rose enough before pre-sanction levels.
*Iran faced sanctions on its crude production until it met its nuclear commitments and after a meeting with the world’s biggest powers, sanctions were lifted. Iran can now export its crude to other countries.
Basically, keeping in mind that crude producers are actually looking for ways to curb production so as to bring oversupply in a desired control, crude prices have actually risen.
What else made crude prices jump?
Rising demand and a weakening U.S. dollar
A rise in U.S. gasoline demand and a weaker dollar also helped to elevate crude prices lately. Binary options traders may have noticed the reversal trend caused by a weak dollar which eventually results into higher crude prices. This trend has been long scrutinized in the binary options trading field and has well been true for many investors and traders. A rise in crude prices has mostly been triggered by a weaker U.S. dollar while a rising U.S. dollar may weigh on crude prices causing them to fall. With a soaring gasoline demand and a slowing production, things might already be getting better. However, the crucial question remains that if Iran backs out from the idea of reducing its production, things could remain worse.
The bottom line
Binary traders should see resistance for crude oil prices around the $45 a barrel, while it has already crossed above the previous resistance line of $35 a barrel. The $35 level is now a basic near support line. Thus I would recommend traders to verify the current trend, look out for the Qatar meeting in April and take wise steps while trading crude. Note that before and after the Qatar meeting, a huge array of trading opportunities may crop up.