Oil Drops Again

2015 was not a good year for the price of crude oil. It dropped from a high point of close to $65 per barrel, down to the current price of about $34 per share. Before this year, oil had had a rough 2014, falling drastically during that calendar year, too. In short, crude is in rough shape, and there’s no sign that a turnaround is going to happen anytime soon. In fact, many experts believe that oil could drop even further in the near future. At the very least, the rest of 2015 and the beginning of 2016 is not going to see oil recovering in any sort of sustainable fashion.
Let's see what Oil Does
Taking a quick look at history is crucial here. Back in 2005, oil was priced at about $50 per barrel, and then quickly rose to over $120 per barrel by 2008. Projections at this time said that a price of $105 was possible by the year 2009, something that was obviously crushed as this price was hit and surpassed far earlier than 2009.. At this time, experts believed that oil could go up as high as $200 over the next two years.

Then the financial crisis of 2008 hit, and the U.S. began tapping into oil reserves to try and help the economy. There was also an increase in oil production in the U.S. and in the neighboring Canada to try and offset the amount of imports coming into the U.S. and help the economy right itself. In 2008, OPEC nations were producing just over 1 million barrels of oil per day. In 2009, production went up to almost 4 million. This drove down prices all over the world, but it was the only way to really keep the cash flow into these oil producing nations steady as the U.S. and other nations also upped the supply of oil.

The demand for oil has not gone down. In fact, it’s risen greatly over the last five years. The difference is that oil production has gone up, and this has narrowed the gap between the supply and demand, driving costs down. Oil is a limited resource, and production is not on a pace that can be kept up for too long. The price of crude will go up in the near future. It might be a year, or it might be five years, but it will go up. Going long for the long term is smart, and now could be a good time to enter the market with a futures contract. However, this doesn’t help short term binary options traders set to make money over the course of a few hours. For now, watching what momentum indicators like MACD and RSI is the best way to approach trading oil, as long as you use these things in conjunction with the basic fundamental information and any news events pertaining to the price of crude oil.

As a trader, watching what happens with oil is important in deciding how you should act. A one hour binary options trader will not act in the same manner as someone that buys and sells futures contracts on a regular basis. It is hard to measure what the price of oil will do over the short term simply because the same amount of data isn’t available for crude oil traders as there are for stock, index, and currency pairs. It makes the shorter term decisions much more difficult to make with any sort of accuracy, and this can hurt traders if you’re not careful. Instead, looking at the long term while keeping an eye on short term policy changes will help you to make money trading crude.