TRADING TIPS & TUTORIALS
Lowest Crude Oil price in 35-years history! How to profit from it?
Crude Oil also known as “black gold” is something that is moving the world economy! In this article, we are going to take a look at how to understand what is happening in the market and how to take this situation as your advantage.
First, let's take a look at what is the crude oil and how we are using it today.
Petroleum is a naturally occurring, yellowish-black liquid found in geological formations beneath the Earth's surface.
What does it mean?
10 million - 600 million years ago when the remains of plants and animals such as planktons were composed on ancient sea floors and lake bottoms under intense pressure and high temperature within the Earth. These remains were transformed into natural gas, coal, and oil. That’s why they are called fossil fuels. Blackish yellowish bad smell liquid.
That’s all great but how is it connected to our normal life and also investments?
It is really connected to us. Without crude oil we couldn’t have diesel fuel, motor oil, ink, floor wax, ballpoint pens, football cleats, upholstery, sweaters (that explains the itchy sweater I have at home), boats, insecticides, bicycle tires, sports car bodies, nail polish, fishing lures, dresses, tires, golf bags, soap (that explains why soap doesn’t clean oil off your hands), motorcycle helmet, CD player (do people still have these?), life jackets….etc.
So, we can agree that in our everyday life the crude oil is a really important factor around us, almost everything is made from crude oil!
How to invest it?
Because it’s a liquid substance, it is stored in a barrel. 1 barrel = 100 liters of crude oil. There are two option on how you can invest it. Option number one is that you can go to the middle east and negotiate with the people there. Buy hundreds of barrels, transport it to the Philippines and sell it for a higher price, but it's so much complicated that it doesn't make sense to do it. Especially if you are a beginner or someone who does not have time to manage it and the most important - this method requires millions of dollars.
There is a second option: You can trade with the virtual price movement. It is much easier than the first option. The only thing that you need is a platform such as MetaTrader 5, which is provided by your broker. In this platform, you will have access to the American oil - WTI crude and the European oil - Brent Crude. Basically you can trade in any movement of the price (up or down) and make a profit. The formula is simple, you will buy low and sell high. The difference between buying and selling price is going to be your profit! The good thing about the Metratrader 5 is that you can monitor your investments from your smartphone, laptop, computer, tablet anytime. You are the only one person who has access to it like in your personal bank account.
What if you are traveling?
Probably you are going to bring your smartphone with you. You have access to your investments anywhere on the planet where is the internet connection.
Why invest in crude oil?
Since last December, when the COVID-19 started to spread around the world, our daily life has been changed. There are lockdowns worldwide, curfews, and our everyday life is concentrated in our house or apartment.The airports are closed, public transportation is shut down, boats are parked at the docks, everything is stopped. As we already know, the number one thing, that we are making from crude oil is fossil fuel such as gasoline, kerosene, and diesel. The international price of crude oil depends on supply and demand. Almost everything has stopped and we can see that supply is much higher than the demand and this is the reason, why the price of the crude oil in the last 3 months dropped down 81%. This is the lowest level since last 35 years. Its cost is 10.84 USD / Barrel (04.22.2020). After this pandemic when the airports, public transportations boats, and all people will go back to normal life, demand for crude oil will increase and it will push up the price back again.
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In 2016 when the oil price was at its lowest level, which was $27. After 2 months the price increased by 96%. If anyone invested 1 million pesos in it, this person would be able to almost double his money in a few days.
This is an opportunity which will probably not happen in the next 2 decades. There is a rule for investors – Buy for a low price and sell for a high price. People will continue to use cars, buses, planes, and other fossil fuel engines after this COVID-19 pandemic. So the best time to buy is NOW!
How much is the optimal amount to invest?
It really depends on the capability of the investor. We can say that amount from 1 Million - 2,5 million pesos is reasonable. It doesn't mean that you cannot invest less. But again, we are talking about something that we didn’t see on the market for 35 years and probably we will not see it again for a long time. This is a unique opportunity.
If this article makes sense for you and you would like to go deeper. We can recommend you schedule a FREE appointment with us in our office, where we can explain to you everything. If it’s not possible for you to come personally, you can schedule a video meeting.
To learn more, we recommend you download our free ebooks so you can increase your knowledge for free.
(Note: Any opinions, news, research, analyses, prices or other information contained in this article is provided as general market commentary and does not constitute investment advice. Trade Forum will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.)
Miguel Francisco Panganiban
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