Trading WTI Crude Oil (USOUSD)

An introduction to WTI Oil

WTI Oil, (West Texas Intermediate Crude Oil,) is one of two global benchmark oil prices. WTI Oil and Brent Crude are the most closely watched prices in the entire market for energy products. It is an essential instrument for any trader to have on their watchlist due to its connection to the world economy and geopolitical events.

Factors influencing price of WTI Oil

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Numerous factors influence supply and demand for oil, which in turn affect the WTI crude oil price.

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Demand for oil depends on the size of the global economy. As the economy grows, demand for oil increases. However, because markets are forward looking, the oil price reflects expected economic growth in the future, which is in turn affected by consumer confidence, inflation, interest rates, and political events.

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Supply is influenced by the amount of new investment in exploration, drilling, processing, and storage capacity. Oil reserves, geo-political events, OPEC production targets, and the capacity to transport oil around the globe.

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Other factors that affect the oil price are the strength of the US dollar and the capacity being built to generate energy from renewable sources including wind and solar. Because most people actually trade WTI oil to get exposure to the oil price, the dynamics within the futures market also affects the price.

Advantages and disadvantages of trading WTI

Advantages

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Trading oil is one way for traders to profit from macro-economic trends and events.

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Oil prices experiences strong trends which can last for years.

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Geo-political events can create volatility and opportunity for traders.

Disadvantages

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Unexpected events can create sudden unexpected price moves.

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Oil markets are complex, and a significant amount of research is recommended to stay up to date with its current influences.

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Reading the WTI Oil price chart

The WTI Oil price reached a low of $26.03 in February 2016. The oil price had come under pressure between 2011 and 2015 as new production capacity came on stream in the US causing a global oversupply.

When the oil price falls below $40 for a WTI barrel, speculation grows that many marginal producers will stop producing. This leads to hoarding of oil, and prices soon rise – as we have seen since 2016.

Global economic growth has also been stronger than expected between 2015 and 2018, which has led to speculation of increasing demand.

In early 2017 prices began to fall do to concern that oil inventories were very high, and there was no more storage capacity. However, in April 2017, OPEC announced they would extend production cuts for another nine months – this caused the uptrend to resume.

How can I trade WTI online?

If you want to trade oil, the first step you can take is to follow the price action and the news about WTI oil, and learn how the two interact. If you open a live or demo account with EightCap, you will be able to bring up a chart and follow the price action. EightCap offers CFDs on the WTI oil price, so you can take long and short positions with the use of leverage.

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