Oil Spot Price
It is never easy to predict where the oil spot price will go. Unlike gold and other precious meals, oil is very sensitive to political issues, conflicts and economic figures.
Why the Cost of Oil is Unstable
The only sure thing about the price of oil is that it is uncertain. It can be low this week but shoot up the next few days. It depends on the economic data that comes out of the US and other countries.
Supply and demand also affects the price. Usually the price goes up when it is winter in the Northern Hemisphere. This is because of high demand.
Political instability also affects oil. Before, during and after the Gulf War, the oil spot price fluctuated wildly. The same thing happened occurred during the US credit and housing crisis that spread throughout the world.
The situation in the Middle East is also critical. It is a fact that majority of the world’s supply of oil is from this region. Therefore any geo-political tension that arises can affect the value of oil.
How Does the Cost of Oil Affect the Stock Market?
This is a complex matter. When the cost of oil goes up, it usually means the stock market is down. When the stock market goes on a bull run, cost of oil goes down. This doesn’t always happen, but analysts can use the stock market as a guide for determining the value of oil futures.
The price of oil can change slowly or dramatically. In some cases, the price can shoot up to 100%. What is certain is that unstable oil pricing leads to uncertainty in the stock and forex markets.
The Effect of Expensive Oil
If the cost of oil shoots up, it will lead to higher transportation costs. When transport costs go up, the cost of delivering goods and services increases. This forces retailers to sell their goods at higher prices.
In the United States, the services sector is most heavily affected by the high cost of oil. These services include transport, hotels, leisure media, support services and media. Textiles and car parts are also affected.
If you want to get into the futures market, you have to do more than just study the oil spot price. It is also a good idea if you get in touch with a professional financial adviser first. You can profit from oil, but a lot of research is required.
No related posts.