Oil trade has been one of the most lucrative businesses other than trading in gold. It is commonly perceived to be very expensive and hence is always referred to as the black gold and those who individual who own the wells where they are obtained are extremely very rich people due to its prices. The prices do fluctuate with time and hence whenever there is an increase in the price, which is always the case, they get a lot of revenue from the sale of this product.
The traders usually buy the crude oil contracts for defense and sell them thereafter to make plenty of profits when the prices hike. This is done through the following avenues. They practice to become familiar with this type of products and other trading tools but with minimum risk taking.
The other cost of maintenance is as well very expensive. This is as a result of the many risks associated with this type of business. The risk of fire outbreak, theft and even the spillage of the product expose the traders to a balancing situation, which may lead to the collapse of the business as a result of the loss incurred.
Oil products are virtually used in most parts of the world and hence it drives the economy either towards long term growth or economic destruction. The industrial revolution led to development and production of different types of machines that used the fuel products to function effectively.
These cartels assist the traders in creating a conducive environment for the activities of the marketers of this commodity. However, the marketers and suppliers of this commodity has been able to over exploit the markets leading to several and higher increase in the fuel prices thereby attracting the attention of the government authorities.
A research recently conducted indicates that this commodity is basically used in every part of the world. This has created a wider market for the commodity.
Some traders of the commodity use the most famous oil-storage trade strategy to accomplish their mission. This strategy is a situation where the tank owners and companies that lease out the storage buy the commodity on an immediate delivery mode at cheaper price but holds the commodity and sells contract of future delivery at higher prices.
When the date for delivery is due, they close the existing contracts and open new ones again for future delivery of similar commodity and the product is not allowed to move out of the storage place. This method may only be successful if the forward price of the commodity is higher than the current market prices of the commodity.
Oil trade is very promising in terms of the revenue to be enjoyed at the end of the trading period. Most people like it but it is also exposed to several market risks which makes it less attractive.
The traders usually buy the crude oil contracts for defense and sell them thereafter to make plenty of profits when the prices hike. This is done through the following avenues. They practice to become familiar with this type of products and other trading tools but with minimum risk taking.
The other cost of maintenance is as well very expensive. This is as a result of the many risks associated with this type of business. The risk of fire outbreak, theft and even the spillage of the product expose the traders to a balancing situation, which may lead to the collapse of the business as a result of the loss incurred.
Oil products are virtually used in most parts of the world and hence it drives the economy either towards long term growth or economic destruction. The industrial revolution led to development and production of different types of machines that used the fuel products to function effectively.
These cartels assist the traders in creating a conducive environment for the activities of the marketers of this commodity. However, the marketers and suppliers of this commodity has been able to over exploit the markets leading to several and higher increase in the fuel prices thereby attracting the attention of the government authorities.
A research recently conducted indicates that this commodity is basically used in every part of the world. This has created a wider market for the commodity.
Some traders of the commodity use the most famous oil-storage trade strategy to accomplish their mission. This strategy is a situation where the tank owners and companies that lease out the storage buy the commodity on an immediate delivery mode at cheaper price but holds the commodity and sells contract of future delivery at higher prices.
When the date for delivery is due, they close the existing contracts and open new ones again for future delivery of similar commodity and the product is not allowed to move out of the storage place. This method may only be successful if the forward price of the commodity is higher than the current market prices of the commodity.
Oil trade is very promising in terms of the revenue to be enjoyed at the end of the trading period. Most people like it but it is also exposed to several market risks which makes it less attractive.
This article collected, selected and written by: Author Van Hoc
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