Crude oil is one of the most popular commodities in the world. Most of the world’s crude oil is produced in the Middle East and Russia. The most important by-products are gasoline, diesel, and jet fuel. Common uses for crude oil include plastics, clothing, furniture, and food. There are different types of Crude oil futures. These include Brent, WTI, and Bonny Light crude oil. These names serve as guides for buyers and sellers.
Crude oil with the Brent label indicates light, sweet and low density. On the other hand, the Western Canadian Select is a heavier type. Dubai Crude stands for Medium Sour Oil. Oil is traded on large commodity exchanges in the form of contracts. Each contract is 42,000 litres.
Oil futures price and monthly settlements
Unlike most agricultural futures products, the future of oil is determined monthly. For instance, other futures contracts only settle four times annually. As the frequency and regularity of oil price contracts increase, investors can easily identify the expected trend or actual trend in the final oil price.
Oil prices in September 2020 were around $40 per barrel, trading more than $100 below the peak oil price. In December 2019, oil traded for around $60 a barrel. Demand for the 2021 forecast adjusted to reflect weaknesses in the aviation sector, but demand improved in some parts of the world. World oil demand in 2021 is estimated at 97.1 million barrels per day. The global inventory continues to remain on a very high side.
Coronavirus impact on oil demand
The economic consequences of the global pandemic of Covid-19 have delayed oil demand, especially in the aviation sector. At the same time, increased drilling in the United States has reduced the threat of foreign cartels and the significance of manoeuvring.
With this knowledge, what should future investors do? Let’s say the price keeps falling in a short period view that just because the prices are close to the cost of production and the price can’t move in any other direction except in the upward direction.
The outlook for the oil futures market in December 2020
Last October, the November 2020 futures contracts traded at $40.25. The cost for next month, December 2020, is $40.53. The projection for January 2021 is 40.88 USD. In February 2021, oil futures will trade at 40.22 USD. And at some point, the oil price (or at least the oil price predicted at the level of futures contracts) over the next two years is estimated to rise to $43.46 per barrel.
And growth doesn’t end there. After the two-year limit, the oil futures will less often be determined every six months, rather than monthly, or once a year. The last contract available in 2031 will sell for $50.34.
The market offers a few guarantees, but the one we are lending our support to is that actual oil prices will be much more volatile than the relatively tight price ranges of the Oil futures contract. A gradual rise from $45 to $50.67, don’t fall for it. It may be unlikely!
First, future trends always go in a single direction. While the change may be gradual, irrespective of how minor it is, it is generally positive. Undoubtedly, oil prices can rise steadily over the next eight years without a decline, but so far this hasn’t happened in any initial lump, and common sense argues that it won’t.
Oil futures you can trade
You can trade the NYMEX WTI (CL) crude oil futures contract. It is the most liquid crude oil contract globally. You can easily know the current price of crude oil by checking the price of WTI crude oil futures. The crude oil futures of WTI (West Texas Intermediate, US Light Sweet Crude) provides direct access to crude oil and is the most efficient way to trade crude oil after US crude oil production has increased dramatically.
You can use WTI oil futures prices to prepare for adverse changes in oil prices or to speculate whether WTI oil prices will rise or fall. The broad portfolio of WTI futures and options offer greater flexibility in trading oil with WTI’s futures contracts easy correlation with oil prices.
Whether you are a new trader looking to start trading futures or an experienced trader looking for the best way to get your crude oil, NYMEX WTI’s Light Crude Oil Futures is one of the best ways to trade the global oil market.
Buying and selling oil futures requires two useful qualities that are often incompatible: patience and courage. You will need a large bank account balance to register to get started. Oil futures contracts are measured in thousands of barrels, not barrels. In December 2031, it will cost $50,670, but in return, you will receive a liquid asset whose value undoubtedly fluctuates between the present time and the maturity time. What this means you have a sufficient amount of time to think about whether you are making money or making unwise decisions. Nonetheless, be aware that trading oil futures is not suitable for amateurs.