Hi everyone,
Last time I looked at the characteristics of trading gold. This week I thought I’d look at Oil.

Trading oil requires a deep understanding of the market, global economic trends, and geopolitical risks. Traders need to navigate the complexities of the market and make informed decisions based on their analysis and experience.

Key characteristics of trading Oil:

  1. High volatility: The oil market is highly volatile, and prices can fluctuate significantly in a short period of time. This is due to various factors such as geopolitical tensions, supply and demand imbalances, and changes in global economic conditions.
  2. Global market: The oil market is a global market, with prices determined by supply and demand dynamics across the world. Changes in production, consumption, and transportation can all have an impact on prices.
  3. Different types of oil: There are many different types of crude oil, each with its own unique properties and characteristics. These different types of oil can have different prices, depending on their quality, location, and availability.
  4. OPEC: The Organisation of the Petroleum Exporting Countries (OPEC) is a powerful organization that controls a significant portion of the world’s oil production. OPEC decisions can have a major impact on oil prices.
  5. Hedging: Oil trading often involves hedging strategies, where traders take positions to reduce their exposure to price fluctuations. This can involve using futures contracts, options, or other financial instruments.
  6. Energy market interdependence: The oil market is closely interconnected with other energy markets, such as natural gas and electricity. Changes in one market can have an impact on the others.
  7. Geopolitical risks: The oil market is vulnerable to geopolitical risks, such as conflicts, sanctions, and political instability. These risks can disrupt oil supply and cause price spikes.

Oil & Forex:

There is a strong correlation between oil prices and the value of the Canadian dollar (CAD) because Canada is a major oil producer and exporter. The Canadian economy is highly dependent on oil exports, and oil is one of the country’s most important exports. When oil prices rise, it generally leads to an increase in the value of the Canadian dollar, and when oil prices fall, it typically leads to a decrease in the value of the Canadian dollar. The correlation between oil prices and the CAD can be influenced by a variety of factors, including global oil supply and demand, geopolitical events, and fluctuations in the Canadian economy. Traders and investors who are interested in trading the CAD should pay close attention to oil prices and the factors that drive them.

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Potential War in Sudan

There is a potential for war to break out in Sudan.
The clashes are part of a power struggle between army chief General Abdel Fattah al-Burhan and the head of the RSF group, General Mohamed Hamdan Dagalo. The two generals are former allies who jointly orchestrated an October 2021 military coup that halted Sudan’s transition to democratic rule and elections. (Al Jazeera)

What is happening in Sudan?

Sudan also produces oil. They exported $317 million in crude oil exports in 2020. In 2021, its oil fields produced 59,000 barrels per day (bpd). The Sudan Oil Refinery has the capacity to refine 90-95,000 bpd. This could affect oil prices.

Kind regards,