Oil has been a primary topic of conversation for more than a year now, and for good reason, in late 2014, the supply of oil grew to the point of crisis. Unfortunately, the world was producing far more oil than it was using. As the law of supply and demand dictates, the value of the commodity had to fall. Since then, oil has been spiraling out of control. Now, it seems as though the declines are likely to continue. Recent talks of production cuts have been abandoned and the United States supply is still growing out of control. Today, we'll talk about both of these stories, what we can expect to see from the price of oil moving forward, and how binary options traders can take advantage of the trends.
Recent Talks Of Oil Cuts End Without Cuts
Recently, we saw a bit of a rally in oil prices as the results of talks between Russia and Saudi Arabia. The idea was that the two countries who just so happen to two of the world's largest oil producers would cut production by up to 5%. However, those talks recently came to an end without an oil production cut. Nonetheless, the talks were not fruitless. It was announced that the countries, along with Venezuela would put a production freeze into place. Under the freeze, the oil producers will not cut production, but have agreed to keep production levels at January rates and freeze growth. There's also a bit of light in the fact that other countries are likely to join the deal. In fact, even Iran is in talks with their rival Saudi Arabia with regard to possibly joining the oil production freeze.
US Inventories Climb Yet Again
While the freeze in oil production seems to be positive for oil, recent data with regard to United States supplies are creating fears that the production freeze isn't going to be enough to do anything in the face of the massive supply glut in the market. Data released on Thursday by the United States Energy Information Administration showed that crude oil inventories in the United States rose by 2.1 million barrels in the week prior, bringing oil supplies in the United States to an all time high of 504.1 million barrels. In a statement, Pete Donovan, a crude oil broker at New York's Liquidity Energy had the following to say…
“There's a stark contrast between a freeze and a cut and the continued U.S. inventory builds will show the ineffectiveness of any production caps…”
What We Can Expect To See Moving Forward
Moving forward, things simply aren't looking good for oil. Over the past year, we've seen a massive supply glut, and to make matters worse, supplies have yet to decline. In fact, we're seeing more and more growth in supplies week after week. While a production freeze is a relatively good thing, as mentioned by Pete Donovan, there's a big difference between a freeze and a cut, and unfortunately, a freeze isn't going to do much given the current crisis. With that said, I'm expecting to see further declines in the value of oil.
How Binary Options Traders Can Take Advantage Of The Trends
As binary options traders, it's our job to predict what direction the values of financial assets are headed. In this particular case, this job is relatively simple. Given everything we know about oil at the moment, we know that the value of the commodity is likely to continued declining. So, to take advantage of the trends, binary options traders should watch oil closely for strong put opinion opportunities in order to ride the trends down to the profits.
What Do You Think?
Where do you think oil is headed and why? Let us know your opinion in the comments below!
[Image Courtesy of Wikipedia]