At one point in time, about a year ago, the energy sector was doing incredibly well. In fact, just about a year ago we could argue that energy stocks were doing great. However, the sector has been in a crisis since late last year, and that crisis is likely to continue. Today, we'll talk about why the energy sector started struggling, why the sector is likely to continue struggling and what binary options traders can do to take advantage of the trends.
Why The Energy Sector Started To Struggle
The energy sector was on top of the world mid last year. However, toward the end of the year, major concerns with regard to the supply and demand of oil caused the sector to spiral out of control. Soon, oil was trading at incredible lows, dragging the rest of the sector down with it. Ultimately, the supply glut got to be too much to bare, and while Saudi Arabia would generally change production levels to ensure balance in supply and demand, the oil producer decided that it would no longer be the swing producer. Instead, all energy production countries wanted to maintain their market share.
Why This Trend Is Likely To Last For Years To Come
Looking back at the decline in the oil market, it's easy to see why the trend is likely to continue. Ultimately, the declines were caused by supply and demand issues. Since the declines started, there hasn't been much by way of good news with regard to supply or demand. Here are the major issues…
Supply Hasn't Slowed – During this whole process, it was expected that low oil prices would put pressure on producers. As a result, the idea was that production would slow down, leading to supply reductions and the price of oil increasing. However, that hasn't actually been the case. In fact, while we've seen slight reductions here and there, oil output has remained at largely the same levels. This is one of the primary reasons that the value of oil has remained incredibly low.
Demand Isn't Looking Any Better – If demand improved, supply could stay the same and it would be possible to see a recovery over time. Unfortunately, it doesn't seem as though demand is improving, nor will it any time soon. The reality is that the global economy is struggling. As a result, consumers around the world are looking for ways to pinch their pennies. One of the first places they look to save money is on energy costs. This means that until we see positive results from the global economy, we're not likely to see any major improvements in the value of oil nor the energy sector as a whole.
How Binary Options Traders Can Take Advantage Of The Trends
As binary options traders, it's your job to determine which direction assets are headed. In this particular case, this job is incredibly simple. The bottom line is that the energy sector is likely to continue seeing declines. So to take advantage of the trends, traders should pay close attention to assets associated with the energy sector. This means Oil, EDF, Exxon Mobile, Natural Gas, Noble Energy, E.On and more are all prime for the picking at the moment. Follow the trends in all of these assets, looking for strong put option opportunities. This will allow you to follow the downward movement to the bottom where the profits await you! Keep informed and check out the latest financial news.
What Do You Think?
Where do you think the energy sector is headed and why? Let us know your opinion in the comments below!
[Image Courtesy of The California Environmental Protection Agency]