If you are holding out on making a purchase of crude oil, you should know that the time is now to get in line. With less than a week before the weekly low, the US oil futures contract prices are expected to break through the previous all-time high. In fact, traders are anticipating an even bigger sell-off as crude futures prices slip lower again. If you’re not already invested in oil and gas futures contracts, now is the time to get in on the ground floor and lock in a premium price before these trends reverse.
Oil Futures – How Can Natural Supplies Reverse the Oil Price Reverses? With US crude futures contracts set to hit an all-time high over the coming week, the time is ripe for you to step in and make your move. The US supply/demand imbalance is the driving factor behind this market’s constant shifts in price. More importantly, the supply is outpacing the demand – that is, more of the available oil is being purchased by investors around the world than by consumers right here in the US. This imbalance is expected to continue into next year, with China taking the lead as the largest buyer of oil. This phenomenon is happening on a much larger scale than anyone has ever considered, and is changing the way we look at energy in the US forever.
Investors who buy oil futures contracts stand to benefit from this bullish trend. If the market continues to experience price increases like this one – which experts believe is highly likely given the US supply/demand imbalance – then the market will continue to increase in price until supply meets the demand. Then again, if oil futures prices decrease back down to where they were just a few months ago, then those who sold may have suffered a financial loss. As a result, you may want to consider selling now. You will need to determine when the market will go up or down, and be prepared for the impact it will have on your portfolio.
Why does oil’s price reverse? The main catalyst is the fact that the Middle East is in a period of political turmoil, and the stability of oil prices has been threatened by unrest. This situation has also triggered a number of record-high world demand for oil – which most experts agree is good for the economy.
What’s going to affect oil futures prices? Over the course of the next week, there are several indicators that are likely to affect the market. One is the possibility of an increase in Iran’s production. The IEA downgraded its estimate for future Iranian exports to 3 million barrels per day, but this isn’t likely to have an immediate effect. Over time, increased domestic production will lead to an increase in demand – which should help the price of oil to rise.
Another factor that may lead to a price reversal is the United States administration’s decision to lift the ban on crude oil exports. This is expected to have a positive effect on the markets over the short term, and should lead to an increase in global oil exports. However, over the longer term, the lifting of the ban is expected to have a negative impact on the markets, and this may result in a US withdrawal from its oil export quota. The timing of any of these events is difficult to say – but they do have an impact on the market – and the markets are likely to react accordingly.
In addition, a rise in global oil inventories is also expected to affect the markets. As demand increases, the supply will reduce, and this is likely to cause a further reduction in the price of oil. When supply falls, the price of oil rises – but only temporarily. This is because the increased demand is offset by reduced supply – so it is important to determine whether the recent rise in oil inventories is temporary or is a sign of a broader trend.
Another factor that has a direct bearing on oil prices is the politics of the day. A new world war may break out, leading to a military build-up in the Middle East and North Africa, while oil-producing countries to increase their output to meet demand. This can result in increased demand across the globe, which drives up prices. It can also lead to increased supply due to political unrest, especially in places like Iraq and Iran, where the rivalry between the two countries over oil supplies has been on for years. If it happens to the west, the resulting impact on the oil price will be severe and may lead to a change in the trading scenario.