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Is 2021 Crude Oil Worth Investing? 3 minutes to take you to understand the crude oil investment strategy

2022-03-23
2020
  What kind of commodity is crude oil?

  Crude oil is widely regarded as a non-renewable resource.Because of its scarcity and powerful uses,it is called the"King of Commodities"in the international market.Crude oil,like gold,is the most common in our daily life.Commodity.At the same time,crude oil trade is also one of the largest physical trades in the world,and the annual transaction amount is huge.Crude oil is the blood of the industry,and the operation of the world is inseparable from crude oil.Therefore,changes in oil prices will have a great impact on many industries,transportation,natural gas industries and their related stock prices.At the same time,financial derivatives such as crude oil futures and CFDs are also very important.Popular commodities,the daily trading volume is very active,and the fluctuations are also very violent.

  There are three benchmark crude oils in the international oil market,namely British Brent crude oil(Brent),American West Texas Intermediate crude oil(WTI)or Dubai/Oman crude oil(Dubai/Oman).The ups and downs comprehensively illustrate the trend of price changes in the international oil market,and also affect the changes in the current world economic and financial situation to a large extent.Usually they are both rising and falling at the same time,with only a very small time lag or the opposite trend.In the futures contract market,many traders try to seek changes in the three oil prices,and carry out arbitrage for the products with the lagging or opposite trends,because the three benchmark oil prices eventually There will be a return of value,and there will be ups and downs at the same frequency.

  (Introduction to the world's three major crude oil varieties)

  The reason why there is a certain scarcity of oil resources is mainly because oil mines are not available in every country and cannot be produced artificially.Oil prices are a necessity for military,production and people's livelihood in today's countries,so the trend of oil prices is closely related to our lives.This year The most obvious example is that the price of gasoline has been rising all the way,and the driving family is suffering.If we buy crude oil CFDs in advance in the contract market at this time,the money we make may be enough to buy a car.

  (The latest quotations and trend charts of the three major international oil products,the data are extracted from the Energy Bureau of the Ministry of Economic Affairs)

  Fluctuations in crude oil prices affect the market economy at all times,in the following aspects:

  ·Supply side:mainly focus on the production situation dominated by OPEC+organizations

  The supply side mainly comes from the production of the Organization of Petroleum Exporting Countries(OPEC)and non-OPEC countries(Russia,Canada,the United States,China and South Africa and other countries),and the current supply of the oil market can be assessed.At present,the 12 members of OPEC account for about 30%of the total global supply,while among non-OPEC countries,the largest output is the United States,Russia,Canada,and China.Cost is an important factor that determines the amount of extraction.The extraction and production costs of different crude oil producing areas are different.The extraction in OPEC countries is the lowest,about 10-20 US dollars per barrel,while the US or other regions'extraction costs are 30-60 US dollars./barrel above.When oil prices fall,if the cost of oil extraction is too high,it may lead to production stoppages.If oil prices rise,the production costs of oil-producing countries will be lower and the profits will be larger.At this time,the supply may rise.The level of oil prices is closely related to production costs.It is also an important factor leading to the rise and fall of oil prices.

  ·Demand side:focus on the economic conditions of Europe,America and emerging countries

  Developed regions and industrially developed countries are the most important crude oil demand countries in the world,mainly including the United States,Britain,France,Germany,Japan and other countries.Among them,the United States has the largest demand,followed by Europe and Japan,while the largest demand among emerging developing countries is mainly China.Followed by countries such as India.Generally speaking,economic conditions are directly proportional to the demand for crude oil.For example,due to the epidemic last year,the global economy entered a state of blockade and regression,and the demand for oil was greatly reduced.Oil prices once plummeted to record lows.Another example is the financial tsunami period in 2008.Because of pessimism about the future economy,the demand for crude oil is expected to decline,which also causes oil prices to plummet.

  ·War and politics

  In addition to supply and demand,war and political factors have long been a major concern affecting the volatility of raw prices.Among the political factors,the policy awakening of the United States,Russia and OPEC,such as production increases and production cuts,will lead to violent fluctuations in oil prices.In addition,the war factor may also cause oil prices to rise,mainly focusing on the war between major oil-producing countries,because this will affect the oil output of these countries,resulting in passive production cuts.In the past,the Middle East wars in 1973,1980 and 1988 had obviously affected oil prices and pushed up oil prices.The epidemic in 2020 is an economic war sweeping the world.Therefore,this move has directly reduced global demand,resulting in Oil prices plummeted.

  The impact of the US dollar index on oil prices

  Since major commodities,including crude oil,are priced in US dollars,changes in the exchange rate of the US dollar will also affect oil prices.When the US dollar appreciates,oil prices will become more expensive,and when the US dollar depreciates,oil prices will be cheaper.Therefore,most of the time,the trend of the U.S.dollar index has a negative correlation with oil prices,that is,when the U.S.dollar index falls,oil prices usually rise,and when the U.S.dollar index rises,it also suppresses oil prices.

  (The relationship between crude oil prices and the US dollar index)

  ·inflation

  As a major commodity,oil prices will have a significant impact on the global economy.When oil prices rise,inflation will increase,and household necessities will also rise.For example,the energy crisis that just happened this year was due to the shortage of natural gas inventories,which boosted the demand for crude oil.When inflation starts to rise,the expectation of high inflation in the future will cause oil prices to rise,but once inflation is suppressed and liquidity is reduced,it will be a blow to oil prices.

  Is crude oil worth investing in?How to invest in crude oil?

  The investment value of crude oil is as unquestionable as gold.Due to its strong trade dominance and high market liquidity,commodities related to crude oil have always been popular trading targets in the international market.Like gold,crude oil is very suitable for trend investment or short-term trading.Gold only has non-farm payroll data once a month.Crude oil publishes U.S.crude oil inventory data every week,which usually brings drastic volatility to the market,and there will be more investment opportunities for investors.

  How to invest in crude oil?There are several channels for you to choose from:

  ·Crude oil futures

  Crude oil futures are one of the most mainstream trading varieties in the world.The most famous ones are the three major futures exchanges:the New York Mercantile Exchange,the London International Petroleum Exchange and the Singapore International Financial Exchange.The main advantage of directly participating in crude oil futures is that you can directly trade in Taiwan dollars,and the contract specifications are also small,which is more convenient for beginners to contact and learn for the first time.However,at the same time,the disadvantage is that the trading time is not perfect,and it is not in line with the world's three major futures exchanges,which leads to low trading volume.It may be that some orders that are too large cannot be traded in time during low and deserted periods,and the trading varieties are relatively small.Single,only Brent crude oil is available for trading.Crude oil futures traded in the international market can have multiple benchmark contracts to choose from.At the same time,the trading volume is huge,and the risk of slippage is not easy to occur in a high-liquidity environment.Participate in buying and selling.

  ·Crude Oil Fund

  Crude oil fund is the most convenient way for ordinary investors to release crude oil investment.They do not need to monitor and operate the market every day,just invest the money in a professional fund team to take care of it.Here mainly refers to the exchange-traded open-end index funds

  (ETF),is the most mainstream crude oil fund.Crude oil ETFs can be traded on the Taiwan Stock Exchange.The advantage is that it is very convenient to open an account,and it is also denominated in Taiwan dollars and does not involve foreign exchange.However,ETFs can only be traded in one direction,and the risk of ETFs will be great when oil prices plummet.In addition,the ETF itself may also cause the problem of not being able to track oil prices stably at a fixed time point for changing positions.

  ·Crude oil CFDs

  Crude oil contracts for difference(CFD)is a trading model that integrates and optimizes traditional crude oil futures.Major companies in Taiwan have successively introduced this trading method in recent years.The global integration allows Taiwanese investors to enjoy lower costs and more flexible.transaction mode.Due to the large leverage of CDF CFDs,it needs to cooperate with good trading strategies and capital management,that is,it can greatly increase the profit margin at the right moment.Leverage is a double-edged sword,and it can only be achieved when risks are well controlled.It is a weapon for investors.In addition,when choosing a trading platform,you must give priority to large brokers with safety and compliance,and you need to understand their relevant regulations and licenses.

  What are the precautions for investing in crude oil CFD?

  Investing in crude oil CFDs is becoming the mainstream of the market.Because of its 24-hour seamless integration with the world,investors are favored.Working in the day and night for oil has become an investment and financial model for more and more people.However,because crude oil CFDs are mainly concentrated overseas However,the current Taiwanese regulatory authorities cannot manage foreign brokers,so you must give priority to choosing large brokers with both safety and stability to invest.Mainly pay attention to the following points:

  ·Regulatory license

  When choosing a broker,we must first look at whether there is an authoritative regulatory license.Currently,the six major financial regulatory agencies recognized in the world are(in order of priority):the National Futures Association(NFA),the Financial Conduct Authority(FCA),Australian Securities and Investments Commission(ASIC),Investment Industry Regulatory Authority of Canada(IIROC),Japan Financial Services Agency(FSA),Monetary Authority of Singapore(MAS).

  The reciprocal market is governed by the Australian Securities and Investments Commission(ASCI)and St.Vincent and the Grenadines(FSA)in strict compliance with the requirements of the regulator,and all customer funds are stored in international banks separately,customer funds and company operating funds.Complete separation to protect client assets.Adopting network security technology that meets the highest international standards,such as SSL data encryption,embedded identity confidentiality mechanism,etc.,a high-level transaction account security protection system has been established.

  ·transaction cost

  Transaction costs mainly include:spread fees,commission fees,slippage fees,overnight inventory fees,and deposit and withdrawal fees.In CFDs,the spread is the most direct transaction cost,and the bid-ask spread in commodity trading is the spread.For the vast majority of high-quality brokers,they will try their best to provide stable spreads.Unless the market fluctuates greatly(such as the release of heavy data on non-agricultural data or the Fed rate decision,etc.),the spread may expand when the transaction is huge,so the most direct decision The transaction cost is the spread,followed by other fees such as commission fees.

  The reciprocal market implements a commission-free model,which can greatly save transaction costs for investors,make returns faster,and is more suitable for short-term transactions.In addition,there are a variety of accounts to choose from,from mini accounts to high-end accounts,suitable for investors of different capital levels,truly realizing zero threshold investment in foreign exchange,and one account to buy all over the world.Taking several mainstream foreign exchange currency pairs as an example,the spreads of EUR/USD,USD/JPY and AUD/USD are as low as 0.7,gold and silver as low as 2.8,crude oil as low as 4.5,Ethereum,Bitcoin The currency spread is as low as 8.6,which is the lowest level in the market.

  ·Chinese service

  Since most overseas investment platforms are for foreign investors,they are mainly in English,and Taiwanese investors who want to participate in overseas investment are easily affected by language barriers,and are prone to misunderstandings or improper operations in transactions..Traders with Chinese services are preferred in Taiwan,that is,you can easily control the operating platform and communicate directly with customer service staff in Chinese to avoid unnecessary risks.

  Huyi Market provides 7*24 professional Chinese customer service,free real-time quotes and 24/7 online support.

  Summarize

  Crude oil is a popular trading target in the international market.There are many ways to invest in crude oil,and crude oil CFD has the advantages of low investment threshold,many trading opportunities,and large profit space,whether it is a band operation or a short-term investment.Appropriate,especially the weekly announcement of U.S.crude oil inventories usually brings violent market volatility,which can create many profit opportunities for investors.However,ETFs issued in China can only be traded in one direction and are easily affected by factors such as large discounts and premiums,which makes it difficult to make profits.The options for trading crude oil futures are relatively simple,and there is a lack of arbitrage opportunities.Therefore,Taiwanese people who currently choose crude oil CFD investment are more and more More and more,the mutual market platform is standing out among many brokers with its outstanding capabilities and strong platform support.

The above information is provided by special analysts and is for reference only. CM Trade does not guarantee the accuracy, timeliness and completeness of the information content, so you should not place too much reliance on the information provided. CM Trade is not a company that provides financial advice, and only provides services of the nature of execution of orders. Readers are advised to seek relevant investment advice on their own. Please see our full disclaimer.

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