Oil recently jumped up by 6 percent, surprising a lot of traders that focus on commodities. Crude rose by $2.29 per barrel—6.15 percent—up to $39.55 per barrel on Friday, April 8th. There were a few major factors that contributed to the rise in prices, including the U.S. Federal Reserve’s comments on the economy, U.S. oil production, and an OPEC deal that seems to be limiting production by some of the major players in the oil production world, such as Saudi Arabia and Kuwait.
The U.S. has cut its oil supply by 5 million barrels recently, which went well against analyst thoughts that there would be a build of over 3 million barrels. With less supply, prices can go up because of increased tension with demand. This is just one of the major factors, and perhaps the most concrete of the three listed above. When it comes to the Fed, they have the ability to change their policy at any time, and OPEC’s production cut doesn’t have the support that they were looking for from Iran. And although Iran keeping production levels up at an elevated may not have the same impact that Saudi Arabia, but it is an X factor that can keep prices down lower than they could be for the time being.
The biggest contributing factor, though, is the fact that investors now believe that the global economy can only go up from here. Asset’s in general will see price rises if this is true, and crude oil has more proven room for improvement than almost any other asset out there. Binary options traders need to be cautious of this as long term growth does not necessarily equal short term rises in price, but if a consistent trend of well-timed call options is instituted, then success is far more likely as it overcomes short term variance within the marketplace. The sentiment for the global economy is shifting and the bear market that people kept talking about seems to be a thing of the past. The only way to determine this for certain is in retrospect, but current signs show that buying is on the rise, and this will keep driving up the price of crude if the trend continues.
Whether or not the increase in oil is going to be sustainable is debatable. There are a lot of factors weighing against oil, and in all honesty, a dip in prices in the very near future is quite likely. Big gains like this typically see some backtracking, especially when things are not as stable as they could be. Experts believe that oil will go up again, but it might not be an immediate thing, and it might not be a straightforward thing. Ups and downs are a natural part of the market—any market—and thanks to the fact that oil has been so volatile for so long, it will take more than a few positive signs for long term growth to occur. In fact, it will take many positive signs for a very long period of time to get to the point where a bullish outlook on oil is warranted. For now, take this good news for what it is, and form your trades appropriately. If your binary options broker offers long term oil trades, call options are warranted, but when you start looking at timeframes of a few hours or less, you will need to be cautious about the timing of your trades and what the overall feel for crude is at the given moment. Also, keep in mind that sentiment can change, and if it turns against you while your trade is open, you might find an unexpected loss.