Strategies for Trading in Brent Crude Oil for Prop Traders

Oil is a non renewable resource and hence its supply is to a limited extent. Globally the benchmark for any developing economy is the Oil import or export bill. The recent US government has stressed on increasing the production of crude within its own oil fields throwing a spanner in the midst of rising Geopolitical tension due to Oil. OPEC was formed on 14th September 1960 by five oil producing countries and has been driving the markets since then. Oil is an important commodity that represents an opportunity for traders during prop firm challenges as it has strong price derivation due to demand and supply along with ever increasing demand. Few risks, strategies and advantages of trading with a prop trading firm for Oil are as follows -

Keep a Check on Dollar Rates and Oil Prices

Large parts of the globe complete their demand for Oil with Dollar payment. And hence drives the price of both Dollar as well as oil. This exercise will help in understanding the trade momentum and gain entry exit price for the trades.

Demand and Supply

Oil prices are driven largely by demand and supply. Demand generated by developing countries is most and their import bills derive the rates. Keeping a check on this part will help in driving the right strategy for trading.

OPEC decisions

Supply of Oil by OPEC is key to understanding the economics behind the global prices. Must for all traders who have a stake in Oil trades to analyze the news related to OPEC news.

Inventory Levels

Traditionally the inventory levels have been a driving factor for Demand and Supply, in turn the price levels. But lately additional factor Dollar rates and agreements with Oil producing countries adds into price levels.

Technology advancements for Oil Exploration

Since the significant cost derivative for Crude is the exploration of drilling and refining cost. There have been significant changes in the same and any major change in technology will impact the cost and in turn the cost and then the prices. So if there is a long position then this factor is a must to be considered.

Alternative Fuels

The world is actively looking for alternative fuels and there are key milestones that have been achieved with EV, Hydro Fuels and Solar energy. So dependence on Crude has reduced. Though still a lot needs to be done in this sector but they are catching up. This is another factor that will drive the prices in the coming time.

Geopolitical Situation

In the last decade the whole world has been through significant events such as the Pandemic, Russia Ukraine war, the Middle east crisis and these events have shaped the prices to a very significant level. Careful analysis of such events can be a marked difference of getting a good trade on the portfolio.

Conclusions

Oil Trades are a great hedge. Patience, right entry price, good understanding of the business, careful technical and fundamental analysis can be of great support. Oil prices provide opportunities of scalping, trend trading etc as the bid and ask is fluctuating. Carefully tread through trades, keep a close check on all the above events and then place the trades. The future is oil and will always be here to stay and deal with since human beings now can’t work without oil.

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