On Friday, oil rallied to its best in 3 years after China’s released data that exports rebounded last month. Activity in stocks rallied late mainly in emerging markets with the euro making gains in spite of growing concerns on growth in Germany.
The biggest gains in the market was oil with Brent advancing 1.7 percent breaking the $70 threshold to $71.4 a barrel for this week, with a 33 percent yearly gain. The net long position on Brent climbed 2.7 percent to 358,141.
For the first time in its sixth straight week, WTI also rose in its longest run in 2 years.
Bullish oil optimists helped to rally prices as fighting in worn torn Libya together with the recent coup in Sudan, supply cuts in Venezuela and Iran together with the supply cuts by OPEC, added to the uncertainty in the markets.
According to strategist at BNP Paribas, Harry Tchilinguirian who said that if oil continues its course, because of the potential over- tightening in the market, they expect oil to move higher in Q2.
Exports in China rebounded, with money supply numbers positive, offsetting weaker imports in Europe. Senior Global Strategist at TD Securities, James Rossiter said that although the data was a little mixed, there were positive overall money supply numbers.
In Asia, Chinese blue chips closed flat, while in Australia Chinese iron ore prices helped it gain 0.85 percent with the Nikkei in Japan also gaining.
Mitsuhiro Furusawa, IMF Deputy Managing Director is warning of a bigger than expected slowdown in the economy in China which is a key risk and threat to the global economy.
In Germany, there are growth concerns, with Der Spiegel magazine in Berlin reporting that the economic growth forecast for 2019 is set to half from 1.0 to 0.5 percent. Leading economic institutes in Germany have set it to 0.8 percent. Germany’s 10-year government yield was back in positive territory in bond markets.
The European central bank was also cautious following their policy meeting earlier in the week, on worries on growth in Europe. Fund managing director at the International Monetary Fund, Christine Lagarde commenting on Brexit in the UK said that the 6-month delay given by the EU to Britain has helped to avoid a no-deal Brexit, but there is still uncertainty on the final outcome.
• The pound sterling gained slightly for the week
• Gold was at below the key level at $1,300 an ounce
• Spot gold closed at $1,293.24 an ounce.
How can you actually use this?
What many traders do not realize is that trading oil CFDs can be highly profitable, especially in volatile markets.
Today’s news is an illustration on how geopolitical issues can influence the oil market, disruptions in oil in Venezuela, Libya and sanctions on Iran all are important factors on the price of oil.
Always a demand
That’s not all. If you consider how the world relies on oil for their economies irrespective if the wider stock market is not performing well, there will always be demand for oil.
Oil is perceived as a barometer of the health of global economies and is a reflection on the economic growth of economies. Prices fluctuate according to geopolitical events, war (shortages) and weather conditions. This is reflected in the West Texas Intermediate (WTI) light futures contract, with the benchmark rates.
Ideal for day traders
It is an ideal investment for the day trader because of its volatility, prices constantly change. So if you are looking for the ideal investment you will discover that trading on oil prices using contract for a difference (CFD’s) allows you to get in or out anytime, irrespective of the size of the trade.
Available around the clock, Mondays to Fridays you can trade Crude oil CFDs on the New York Stock Exchange (NYMEX) with WTI/Light Crude or alternatively on the Intercontinental Exchange (ICE) on Brent crude, with an option also to trade heating oil.
How does it work?
You have a substantial amount of leverage, (resulting in profits or losses) meaning that usually crude oil CFD is based on 100 barrels so for every $100 you trade you have the potential to make $1,000 per trade (or loss).
Spreads are normally 5 to 6 points while there is a 3% margin required to trade CFDs.
If you consider trading oil CFDs over a longer time frame in the oil futures, (over a course of a couple of months) then you need to apply wide stop loss orders to protect yourself.
As an example, if you trade $1 CFD which is deposited in your account, on a $10 movement or 1,000 pips movement in the price of crude you can make a handsome profit of $1,000. It should be noted that oil futures is a highly volatile market with prices fluctuating especially towards the expiry date.
Let’s look at another scenario:
It is important to note that the tick size for Spot WTI Light Crude oil is 0.01 so with a price movement from 72.25 to 72.35 = 10 ticks, also all prices are quoted in US dollars, it is the base currency for the underlying Brent Crude Oil Market.
You feel bullish that Spot WTI light crude oil prices will soon rise because of the increase in speculation on the price.
• Your broker is quoting 72.25 – 72.30
• You decide to purchase 30 WTI CFDS @ 72.30
The price rose over the course of the next few days and is now being quoted at 73.12-73.11
• You decide to close your trade and sell all 30 CFDs at 73.12
• You realize a profit of the difference between 73.12 (your sell price) and the price you bought them at 72.25 multiplied by your stake.
We can’t emphasize enough…
This strategy could work in the reverse as well which could result in substantial losses!
The strategy of buying low and selling high to profit from prices breakouts is an old time strategy. With CFDs trading, you also have the option of betting on falling prices.
Now, if you want further exposure to the oil markets you are also able to buy into Royal Dutch Shell and Tullow Oil indirectly as well as other CFDs related to oil on 24option’s platform.
On the oil futures category where the index mirrors the performance of the oil industry overall you can view the changes in the prices of the various companies as well.
Some of them include:
• Exxon Mobil, Total-Fina and other smaller oil company stocks
• UK oil and gas sector CFDs
• USA oil and gas sector CFDs
• USA natural gas CFDs
The good news is that with CFDs you are not restricted to trade at full size and actually take physical delivery of barrels of crude.
Unlike the Futures market where the min trading size is 1,000 barrels, CFDs trading allows you to deal in smaller sizes unlike futures, plus you don’t actually own the asset. You are only trading on the increase or fall of an assets price.
Forex and CFD broker24option is a reputable and trusted brand which has a new advanced platform that is easy to use even for beginners. Their MetaTrader 4 trading platform supports advanced financial tools and graphs that give you the tools to strategize.
You will find that they offer over 150 underlying assets, which includes indices, commodities, stocks, currency pairs and the most popular cryptocurrencies to trade.
You can easily switch from CFDs to Forex trading without the need to close any windows on your computer with one click on the mouse. You can also trade on your mobile devices running on Apple’s iOS and Google’s Android.