Oil trading is the buying and selling of one of the world’s most highly-prized commodities. From transport to food production, the oil industry fuels many global sectors.

Oil is a non-renewable energy source that can be found in a variety of forms, including refined oil products like gasoline, diesel, and jet fuel, and crude oil, which is taken out of the ground.

Economic conditions, supply and demand, and geopolitical developments all have an impact on the price of oil.

Finxocap presents a complete understanding of the factors that influence the oil trading market, as well as how to include oil in your financial strategy.

Oil Trading – Outlook March 2024

West Texas Intermediate (WTI) US crude oil prices continued to fall, hitting $78.75 on March 5.

The commodity has remained depressed throughout the first half of the European session and is currently trading at the daily low, around mid-$77.00.

Investors are anxious about the world’s worsening economic prospects, particularly after Japan and the United Kingdom entered a technical recession in the fourth quarter of 2023.

Furthermore, fears that increasing borrowing costs would stifle economic activity and reduce gasoline demand in the world’s top oil user proved to be major factors driving down oil prices.

However, concerns about tightening global supply owing to disruptions in the Middle East may continue to support the commodity and limit any substantial corrective slide.

In fact, the Israel-Hamas conflict shows no sign of abating, while attacks on commercial vessels by Iran-aligned Houthi rebels in Yemen have heightened concerns about commerce flows through the crucial Red Sea waterway.

Meanwhile, the United States Energy Information Administration (EIA) said in February 2024 that US crude oil inventories increased by 3.514 million barrels.

A voluntary reduction in oil output of 2.2 million barrels per day (bpd) has been extended by the Organization of the Petroleum Exporting Countries (OPEC) and its allies (OPEC+) through the second quarter of 2024.

Saudi Arabia has declared that it will extend its voluntary reduction in output to one million barrels per day.

Additionally, Russia has pledged to cut its oil production and exports by an extra 471,000 barrels per day.

Furthermore, it has been decided that Iraq and the UAE will keep lowering their output by 220,000 and 163,000 bpd, respectively.

This reinforces hopes that demand from US refiners will rise following the recent outages, and caution should be exercised before putting negative wagers on the black liquid.

Even from a technical standpoint, crude oil prices have been swinging inside a similar trading range for the previous week or two.

This suggests traders are undecided about the next leg of a directional move.

Oil companies – Generating hundreds of billions each year

The world’s top oil companies generate hundreds of billions each year through the oil trade.

Check out the top 10 oil companies:

Rank | Company | Ticker | Market Cap | Country 

1 | Saudi Aramco | 2222.SR | $2.042 T | S. Arabia  

2 | Exxon Mobil | XOM | $420.09 B | USA  

3 | Chevron | CVX | $278.42 B | USA  

4 | PetroChina | 601857.SS | $220.09 B | China  

5 | Shell | SHEL | $203.44 B | UK | |

6 | TotalEnergies | TTE | $150.06 B | France  

7 | ConocoPhillips | COP | $132.21 B | USA  

8 | CNOOC | 0883.HK | $106.23 B | China 

9 | Petrobras | PBR | $105.56 B | Brazil  

10 | BP | BP | $101.34 B | UK |

Oil Trading: Powering the global economy 

Crude oil has a special place in the global political and economic systems, making it a great investment opportunity in almost every market scenario.

Furthermore, the volatility of the energy industry has increased significantly in recent years, guaranteeing robust trends that can yield steady returns for both long-term timing methods and short-term swing trades.

Oil trading could be your path to market success

Want to learn more about oil trading? Check out the four top factors about trading in ‘black gold’:

1 Oil trading: What drives the oil price?

Crude oil is influenced by supply and demand, which are both influenced by both global economic success and worldwide productivity.

While rising demand and falling production encourage traders to bid more on crude oil, oversupply, and sliding demand drive traders to sell crude oil.

Strong uptrends, such as the 2022 spike in crude oil prices to $123 per barrel, can be generated by a convergence of positive factors.

While strong downtrends, such as the 2020 Covid pandemic, can cause it to fall to as low as $11 per barrel.

Volatile activity frequently lasts for years at a time, and price action tends to establish narrow trading bands as crude oil reacts to mixed conditions.

2 Oil trading – WTI Crude Oil and Brent Crude Oil – What’s the difference?

West Texas Intermediate Crude and Brent Crude are the two main marketplaces in which crude oil is traded.

Brent comes from more than a dozen fields in the North Atlantic, whereas WTI originates in the Permian Basin of the United States and other local sources.

Today, Brent has emerged as a more reliable gauge of global pricing, despite WTI seeing greater volume trading in global futures markets.

For many years, prices between both grades were contained within a small range, but in 2010, the dynamics of supply and demand drastically changed, causing a dramatic divergence between the two markets.

Shale and fracking technology contributed to the surge in US oil production, which raised WTI output at the same time as Brent drilling rapidly declined.

3 Oil trading – professional and hedge traders

Energy futures markets are dominated by professional traders and hedge funds.

Industry participants take positions to counter physical risk, while hedge funds speculate on both short- and long-term market trends.

This market is less influenced by retail traders and investors than more volatile markets such as precious metals or high-growth stocks.

When crude oil prices climb sharply, retail gains a greater influence and draws funds from smaller players in the market lured by media headlines.

The ensuing panic and greed can reinforce the underlying trend momentum, causing historical collapses and rises. Oil trading can be one of the most volatile markets, even overtaking Forex.

The 2020 Covid-19 pandemic saw oil traders sell record volumes of the resource, while the 2022 Russian invasion of Ukraine saw oil hit record highs.

4 Where is oil traded – Biggest exchanges

With more than 10 million contracts traded each month, the NYMEX WTI Light Sweet Crude Oil futures contract (CL) provides excellent liquidity for oil trading.

The 1,000 barrel contract unit and the .01 per barrel minimum price volatility make it relatively risky for oil trading.

Numerous more energy-related products are available on NYMEX; most of these draw professional speculators but not many individual traders or investors.

The most widely used crude oil trading platform is the U.S. Oil Fund, which has an average daily volume of more than 20 million shares.

As production, exploration, and oil service operations present varying trends and opportunities, oil businesses and sector funds provide diversified industry exposure.

Although most corporations follow broad patterns in crude oil, they might deviate significantly over extended periods of time.

These counter-swings frequently happen when the equity markets are rising strongly, as rallies or selloffs set off a cross-market correlation that encourages different sectors to move in lockstep.

Oil Trading: The Top Ten Largest Producers

In today’s oil trading market, the United States is the world’s largest producer, followed by Saudi Arabia and Russia.

Iran, Kuwait, and Iraq are all in the top 10 oil-producing countries.

| Rank | Country | 2022 Production (Thousand B/D) | YoY Change | Share of World Supply |

1 | 🇺🇸 U.S. | 17,770 | +6.5% | 18.9% |
2 | 🇸🇦 Saudi Arabia | 12,136 | +10.8% | 12.9% |
3 | 🇷🇺 Russia | 11,202 | +1.8% | 11.9% |
4 | 🇨🇦 Canada | 5,576 | +3.0% | 5.9% |
5 | 🇮🇶 Iraq | 4,520 | +10.2% | 4.8% |
6 | 🇨🇳 China | 4,111 | +2.9% | 4.4% |
7 | 🇦🇪 UAE | 4,020 | +10.4% | 4.3% |
8 | 🇮🇷 Iran | 3,822 | +4.6% | 4.1% |
9 | 🇧🇷 Brazil | 3,107 | +3.9% | 3.3% |
10 | 🇰🇼 Kuwait | 3,028 | +12.0% | 3.2% |

1.  United States of America

Since 2018, the United States has become the world’s largest producer of oil.

Hydraulic fracturing and horizontal drilling are two technological developments that have increased oil production in the United States.

This expansion has strengthened the country’s energy security, boosted the economy, and altered the dynamics of the global oil market.

The United States is currently producing an unprecedented 13.5 million barrels of crude oil per day, establishing a national and maybe global record.

The top three largest crude oil deposits are located in Texas, North Dakota, and the Gulf of Mexico.

2. Saudi Arabia

The country’s position in the global energy market is supported by the fact that it holds the world’s second-largest proved petroleum reserves, amounting to approximately 17%.

Saudi Arabia became a major oil producer after the Al-Ghawar field was discovered.

It alone enables Saudi Arabia to generate roughly 5.5 billion b/d.

3. Russia

Despite Western sanctions imposed on Russia following Vladimir Putin’s full-fledged invasion of neighboring Ukraine, the country’s oil exports have recovered to pre-invasion levels.

To replace European consumers, it appears to have found buyers in China and India.

Russia, a key ally of Saudi Arabia in the OPEC+ alliance, is forecast to produce around 9 million barrels of crude oil per day.

However, since the invasion of Ukraine, the country has withheld information concerning its oil production and exports.

Analysts expect crude oil output in Russia, the world’s third-largest producer after the United States and Saudi Arabia, to remain stable or even expand in 2024.

The official Russian oil production ceiling for 2024 is 9.95 million barrels per day, but from February 2023, the country has voluntarily lowered output by 500,000 barrels per day, and other OPEC+ members, notably Saudi Arabia, have followed suit.

Oil Trading: A Great Asset for Your Portfolio

Because of their huge oil reserves and high production capability, the major oil-producing countries have a considerable impact on world development.

Oil companies likewise, have become a huge generator of wealth for shareholders, with Enron, BP, and Shell reaching record highs in 2023.

Oil trading is a great way to diversify your portfolio with an asset that’s always in demand in a multitude of sectors.

Oil Trading in South Africa: Benefits of Trading with Finxocap in 2024

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Finxocap’s services have won industry awards for their exceptional customer service, technology, and overall trading experience.

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Advanced Risk Management Tools: The platform contains sophisticated tools for effective risk management, which is a key component of trading, especially during tumultuous periods. Finxocap offers competitive spreads and low fees, which are crucial for maintaining profitability, especially among frequent traders.

Community and Networking Opportunities: The platform features a trader community, which allows for networking and strategy sharing, enhancing the overall trading experience.

Continuous Innovation: Finxocap’s services are regularly updated to ensure that traders have access to the most recent and efficient trading tools and information.