Is Oil the most important commodity?

Oil is going to be the most important commodity for the global economy for many years to come. You must have understood the importance of oil to the global economy by the way the global financial markets react to the news of any possibility of disruption in the global oil supply.

Now when we talk of oil, we are infact talking of energy. Energy and oil are two terms that are used interchangeably. Trading in energy futures is centralized at New York Mercantile Exchange (NYMEX). NYMEX is the world's largest physical commodity exchange. NYMEX trades futures and options contracts for crude oil, heating oil, natural gas, propane, coal, electricity, gasoline and metals.

NYMEX has two divisions for trading: 1) The NYMEX Division and 2) The COMEX Division. For small traders there is an E-mini futures contract for crude oil and natural gas that trades also on the Chicago Mercantile Exchange's (CME) Globex network. So even as a small trader, you can trade crude oil futures contracts. Crude oil trading is highly profitable if done correctly after getting good training.

Now when you trade the oil markets, you must have a good understanding of the supply and demand of crude oil. Demand can be limitless but supply is always finite. Oil production in some OPEC oil producing countries like Venezeula, Iran and Nigeria has already peaked. Similarly in Non-OPEC North Sea and Mexico, oil production is about to peak.

There is a theory that says that oil production is going to peak in coming 10-15 years after that the supply will decrease and the demand is going to rise more and more. As a trader trading oil prices, you need to be aware of these facts and your primary goal should be to correlate the effect of events on the global supply of oil with your charts. Any fluctuation can make you a windfall gain.

 

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