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Crude Oil Fundamentals

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Basic Fundamentals

What Market Fundamentals Can Affect The Crude Oil Futures?

In free market economies, supply and demand is the primary enabler for price movement. Any outside forces that affect supply and demand eventually affect prices. When you are considering a trade in the crude oil market some of the basic fundamentals that you should consider are:

1. US Dollar The global crude oil market is priced in US dollars. The US dollar floats freely and is affected by interest rates and fiscal policy as well as other factors. If the US dollar drops, Americans feel the pinch more acutely than Europeans or Japanese buying oil with stronger currencies, and vice versa.

2. OPEC Members of the Organization of Petroleum Exporting Countries (OPEC) export about 55% of the oil traded internationally. Therefore, OPEC can have a strong influence on the oil market by increasing or decreasing their production. Occasionally, OPEC works with non-OPEC producers such as Mexico, Norway and Russia to have a greater impact on global supply.

3. Geopolitical Risks Supply shocks in Venezuela, Nigeria, and the Middle East are becoming more frequent and can dramatically impact global oil prices.

4. Weather A very hot summer or very active driving season can increase the demand for crude oil and cause prices to move higher. An extremely cold winter can increase the demand for heating oil, which is made from crude oil, and causes prices to move higher. A hurricane in the Gulf of Mexico can cause oil prices to spike because of the potential impact it may have on: offshore oil platforms, foreign shipments of oil, and refinery operations.

5. Inventory Reports There are two major weekly inventory reports that are helpful in your research and trading of crude oil futures and crude oil options. The American Petroleum Institute publishes their report on Tuesdays, and the US Energy Information Administration publishes their report on Wednesdays. These reports are very closely watched. They summarize crude oil and refined product inventories and refinery utilizations rates in the United States.

These are just some of the basic fundamentals to keep in mind when you are considering a trade in the crude oil market. Therefore, before opening up a commodity account to trade crude oil, you should consult with a licensed commodity broker that follows the crude oil market to discuss investment strategies.

Click here to contact a commodities broker with experience in the crude oil market.

Commodity trading is not suitable for everyone. The risk of loss in trading can be substantial. This material has been prepared by a sales or trading employee or agent of Van Commodities, Inc. and is, or is in the nature of, a solicitation. This material is not a research report prepared by Van Commodities, Inc. Research Department. Please view our Risk Disclaimer.

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