3 Tips for Trading Crude Oil with Bitcoin
Crude oil is known to have some of the best conditions for trading in a range of market conditions due to its unique standing in the global political and economic systems.
Of all the classic market instruments, crude oil is also well known for its volatility, offering crypto traders some of the best trading opportunities however many traders fail to take advantage of these fluctuations due to the fact that they haven’t learnt enough about the unique characteristics of crude oil markets.
In this article we take a look at 5 tips to trading crude oil with bitcoin and how you can take advantage of this global asset when trading.
1. Know Industry Organisations — OPEC and EIA Reporting
Crude oil production by the Organization of the Petroleum Exporting Countries (OPEC) is an important factor that affects oil prices. OPEC ensures the stabilisation of oil prices in international oil markets, with a view to eliminating unnecessary and harmful fluctuations in the price. In addition, the aim of OPEC is to secure an efficient, economic and regular supply of petroleum to consuming nations and to ensure that there is a fair return on capital for those investing in the petroleum industry.
If OPEC wants to try to curb production, thus limiting supply, this typically forces prices higher. Conversely, if OPEC wants to try to boost crude oil production, thus increasing the supply of crude oil, this will often push crude oil prices down.
In addition, the Energy Information Administration (EIA) is an independent, impartial organisation which maintains reporting on US crude oil inventory levels on a weekly basis. Inventory levels include import, export and production levels
If the report shows that US crude inventory is rising, supply is outweighing demand and price may typically fall in response. If inventory is falling then this may mean that crude oil demand has outstripped supply and crude oil prices will go higher.
If you want to start trading Crude Oil using bitcoin, it is important that you get to know industry organisations such as OPEC and the EIA and how their activities and released reports ultimately affects the price of crude oil.
2. Stay up-to-date with China
It’s no surprise these days that today’s oil market is being driven by China, or more specifically, is being driven by the perception of the trade dispute that is happening between China and the US, prospects for China’s economic future and forecasts for China’s oil imports.
Crude oil prices have tended to rise as traders anticipate strong demand in China, most typically, when China has strong economic performance. In comparison, oil prices tend to be negatively affected during periods of reduced activity in China as traders anticipate a reduction in demand.
If you want to trade crude oil with bitcoin, it is important that you have an understanding of how China and its relationship with the US impacts the price of crude oil.
3. Understand the Geopolitics of Oil — Middle East
Just like many other commodities, Crude oil prices are greatly impacted by geopolitics due to supply and demand perceptions.
It is important that you are aware of the news and what is being reported in the global market as one of the most unpredictable aspects of crude oil trading is the huge impact that geopolitical activities can have on crude oil prices.
When the international economy weakens there can often be reductions in the global demand for oil. In addition, increases in fighting within regions where much of the world’s crude oil comes from, such as the Middle East may also lead to the throttling of oil wells, pipelines and processing facilities reducing the availability of oil supplies or even simply sharp and sudden spikes in oil pricing as traders anticipate (perceive) a reduction in supply.
Natural disasters also play a part in the restriction of oil production and distribution as well as other factors such as US sanctions on countries whereby restrictions are placed on foreign buyers purchasing local oil supplies may also cause unnatural price spikes in crude oil.
Moral of the story is to stay up to date with industry organisations, aware of industry headlines and make sure you do know your geopolitics when you want to begin trading crude oil with bitcoin.
