Crude oil Price
One of the most traded raw materials in the world is crude oil. Followed by the raw material gold. It has been known to be of interest to investors because of the liquidity of this market, but also its volatility. Before you start investing in oil, it is recommended to learn more about it. Mostly because it is important to create broad analysis of oil. The oil price will tell you a lot about the economy of the world. It is an important measurement. Around the world oil is the most used raw material. Therefore, it is important to transportation and industry.
The actual raw material prices are constantly moving. This raw material is traded worldwide just like gold and keeps moving. In the graph below you can see the current oil pricing, which is updated daily.
What is crude oil?
Oil, or crude oil, is a fossil fuel. It is a black (light sticky) fluid, flammable and derived from the leftovers of plants and animals. It is the most commonly traded raw material and has a huge impact on the world’s economy.
Development of crude oil
Crude oil starts its life on the bottom of the sea. It arises through a leftover of single cell organisms (like plankton) that drifts to the bottom. These then fall down under a layer of stones, sand and clay. Because of the high pressure, the temperature of this layer of dead organisms rises. A chemical process starts, which creates crude oil. These layers of crude oil are sometimes more than 120 million years old!
Which types of oil are there?
In the financial market there is usually talk of only 2 types of oil. Mostly it’s about the American oil: WTI and the other variant is Brent oil. We like to explain to you what these two types of oil mean, where they come from and what their differences are.
The abbreviation WTI stands for West Texas Intermediate. It is also called Text Light Sweet. This crude oil is used by economist as the standard to determine the oil prices in the exchange market. The note is prices at the New York Mercantile Exchange. This is the most important stock exchange in the world.
A fact about WTI crude oil is that it’s very light. It has a low amount of sulfur (0.24%) and an API-density of 39.6.
The Brent oil thanks its name to a field in the North Sea. In 1976 the exploitation of this field started, which is located in the direct vicinity of Scotland. In Europe this is the most important player in the market. This platform is now not in use anymore, but there are 19 other oil fields around it, all in the North Sea.
The Brent oil production is not the most important in the world and is far behind countries like the Middle East. Still the Brent oil price is used as an international measurement. This helps to follow the current oil price. If you want to know the current Brent oil price? Check the top of this page.
Difference between WTI and Brent oil
Qualitative there is a difference between both oils. Brent oil comes from the North Sea and has a higher sulfur percentage in comparison to the WTI oil. This makes the quality lesser and the Brent oil more damaging. But, because of the location, Brent oil is much more practical to Europe and the Mediterranean. It can be refined to fuels like petrol, diesel and kerosene.
What countries export oil?
It is important to know where oil comes from and what countries export it. When you are aware of the countries that export it, it is much easier to predict the movements of the price of oil. The geopolitical situation in these countries, like Russian oil prices, have a huge influence on the overall oil prices.
Oil exporting countries and members of OPEC:
Africa: Algeria, Angola, Libya, Nigeria
Middle East: Saudi Arabia, United Arab Emirates, Iraq, Iran, Kuwait, Qatar
South America: Ecuador, Venezuela
Oil exporting countries that are not part of the OPEC group:
- United Kingdom
- United Sates
OPEC is the organization of oil exporting countries is a collective of fourteen countries that export net oil. The intergovernmental organization tries to change the supply of oil and therefore steer the price of oil. Economists describe OPEC often as a cartel.
Investing in crude oil long term
The possibility to invest in oil long term is huge. It is possible to buy stocks in companies that have specialized in the oil industry (or black gold industry). See the actual oil prices at the top of the page.
Investing in crude oil short term
It is also possible to day trade in oil. Besides the long-term investments, the stock market of oil makes it possible to position yourself short, because of its high volatility. Traders that invest in crude oil short term have the advantages that it is a very powerful volatile stock that responds to certain events in the world. Want to know the current oil price? See the page at the top.
Why buy and sell crude oil?
As mentioned before, you can invest in oil in the long and short term, both have their advantages and disadvantages. But why would you invest in oil at all? Analysts give multiple explanations for this:
- One of the explanations we can give for this, is that there has been a fundamentally upward trend in the price of oil for a couple of years now. This fad seems to follow for several years and we can see this in the oil stock market. Specialists and experts explain this rise by the well-known supply and demand game. Especially Asian countries have a higher demand for oil, which makes the price rise. Russian oil prices are also going up due to the war in Ukraine.
- Not just the supply and demand game defines all the upward trends in the oil price. Also the mentioned conflicts and geopolitical tension in producing countries makes the offer of oil move. The ‘black gold’ that has a lot of demand will bring a weak supply and grow prices. This supports more investments which makes prices rise too.
- Oil is a finite raw material. The reserves will run out at a certain point. According to analysts this is also one of the reasons why this brings up the price of oil. The rarer a product, the more the price of oil rises. Because the demand for oil does not get any lower.
Ways to buy and sell oil
Of course there are many different ways to invest in oil. If you are deciding for futures or term contracts. This is a good way to invest in the oil price long term. But watch out: It does require some knowledge of the market and the ability to predict future trends.
Another way to invest in oil is by investing in derivatives of oil. This type of trading is done through CFDs or Warrants.
The two type methods that are described here are ways to buy and sell oil. It’s not about the physical barrels of oil that you buy and sell, but taking a standpoint on the price of these barrels. It takes some time and effort to study the analysis of oil.
How do you predict the oil price well?
Before you start investing in oil, it is logical that you will have to study the market beforehand. This way you might be able to predict a future trend or react to it fast. The movements in oil price you will have to see and understand so that you can buy and sell your investments at the right time.
There are external factors that have a direct impact on the oil price (this concerns the Brent oil prices and the WTI prices, not the Russian oil prices). A direct correlation can be seen between the oil price and the American dollar. Gold, petrol and other raw material are often expressed in American dollars. A ‘strong’ dollar makes buying oil less attractive, because as a foreign investor you have a bad exchange rate. This leads to a slump in demand and therefore a slump in the oil price.
But the opposite can also happen: If the dollar is weak, the exchange rate for foreign investors is beneficial. The demand rises and so does the oil price.
Another element that has a lot of influence on the price of crude oil are the American stocks. The US is the world’s largest user of oil. The supplies of the country are published weekly and this is a simple way to determine the demand for oil. Another analyst uses these figures to give a prognosis. If the supplies are larger than predicted, the demand will be lower. This makes the price of oil go down.
Last but not least it is important to research the supply and demand of crude oil. This makes or breaks the price. Also actual conflicts, like the war in Ukraine, has an influence on the Russian and other oil prices.