Trade Crude Oil

Can you pass this winter without the heating oil heating your house? Something real hard. We are all used to having a warm house with the heating oil or natural gas during winter. importance of oil and natural gas in our lives cannot be denied. Energy is the most important resource for any economy. Without energy no economy cannot function. Do you remember the summer of 2008 when crude oil prices suddenly jumped to around $150 per barrel. The prices came down because of the stock market crash. But they will go up again when the global economy recovers from recession and starts growing again. Many investors and especially hedge fund managers made a killing with this sudden upswing in crude oil prices by trading crude oil futures. Trading energy futures like the crude oil, natural gas, gasoline or the heating oil can be highly profitable. Crude oil reservoirs are being depleted at a fast pace. There is a peak oil theory that says that oil prices will rise in the coming decades as crude oil prices will get decreased while the demand will skyrocket. As a market timer, you should be able to profit from this trend in the market. You need to learn how to trade these energy futures!

The world’s largest energy futures exchange is the New York Mercantile Exchange (NYMEX). NYMEX trades futures contracts for crude oil, natural gas, heating oil, gasoline, coal, electricity and propane. Visiting the NYMEX website can give you a lot of useful information about calendars and the margin requirements for each contract.

Now, apart fromt the regular futures contracts that have a marginr requirement that might not be affordable to some of the investors, NYMEX also provides mini versions of these contracts known as E-mini futures. E-mini oil and gas futres have a much lower margin requirement making them affordable to many of the retail investors. These E-Mini futures contract also get traded on the GLOBEX network of CME Group ( Chicago Mercantile Group). So you can easily do electronic trading around the clock.Many day traders trade these futures contracts successfully.

Oil is the center of the universe not only for the industry and the overall economy but also the financial markets. Oil prices and interest rates usually move in the same direction. Rising oil prices leads to inflation in the economy. Rising inflation forces Central Banks to increase interest rates. Then there is the peak oil theory that says that all the known oil wells have been dug and we have entered a period of decreasing oil supply coupled with increasing demand. In the next decade, oil prices are going to skyrocket.

Energy demand especially for heating oil, natural gas and gasoline is extremely seasonal and cyclic in nature. In winters, our houses need heating oil and natural gas for heating purposes. During summers people tend to drive their cars long distances on vacations.

During the spring, refineries switch production from heating oil to gasoline. This brings a lull in oil prices as production in most of the refineries slows down. Now as an energy futures trader, you need to keep a close eye on the US EIA (Energy Information Agency) and the API (American Petroleum Institute) weekly supply data reports. These reports give key insight into the supply situation of these commodities!

In addition to trading crude oil futures, you can trade gasoline futures as well as heating oil futures. Gasoline accounts for half of the US oil consumption. Gasoline prices tend to follow the crude oil prices. So going long on crude oil futures and short on gasoline futures can be a good strategy!

Mr. Ahmad Hassam has done Masters from Harvard. Trade Crude Oil Futures. Turn $200 into $100K in just 3 months with this Penny Stock Picking System!