How Price Influences Demand In The Oil Investment Market
Many corporate houses and merchant traders are investing in crude oil for the profits it promises to bring. However, the prices of crude oil are largely dependent on free market sources and this is the
Many corporate houses and merchant traders are investing in crude oil for the profits it promises to bring. However, the prices of crude oil are largely dependent on free market sources and this is the reason why you should be aware and educated. If you are investing in crude oil for the first time, it is important for you to take time out to research about the market and know exactly what you are getting into.
The experienced and oil investment consultants at Southlake Resources Group in the USA say that the crude oil investment market is a place that can be very confusing to both the experienced and the new investor. There are huge price changes that often take place every day. Not many investors are keen to open a futures account. However, the following is a guide as to how you can trade in oil investment despite facing the intense fluctuations of price.
Know the factors that drive the cost of oil
In the world today, The Organization of Petroleum Exporting Countries or OPEC and The International Energy Agency have estimated that the demand in the world for oil today is between 86 to 87 million barrels daily. The figure at times may be more. The demand for oil is increasing in the USA however emerging economies are now coming forward to invest in crude oil and so its demand is increasing leading to more rise in price. There are again some nations that have fuel subsidies for consumers and the around one quarter of the demand for oil in the world comes from countries that give subsidies to their consumers.
Nations that have subsidies- how do they affect the production of oil
It is to be noted that most of the time, the above subsidies are not helpful to the economy of the nation. This is because of the fact that they increase demand. This often induces the producers of oil in the nation to sell the commodity at a loss. A nation can increase its oil production with the removal of subsidies. This will increase its supply and subsequently lower the prices. In addition to the above, reducing subsidies reduce shortage of refined products that are alleviated. The higher the prices of oil give refineries an incentive for the production of products like gasoline and diesel.
Supply of crude oil
Southlake Resources Group says that in the year 2008 there was approximately 85 to 86 million barrels of oil that was produced daily. There were new reserve discoveries in 2007 that was a bright spot however the oil fields in Mexico and North Sea has seen a large decline in oil production. According to OPEC, most nations do not have the resources to pump out excess oil. However, Saudi Arabia is one such exception and it has a estimate extra capacity of 1.5 million barrels of oil on a daily basis. Nigeria too has a production of oil and its history of rebels and political instability has not affected it at all!