Is Oil in a Freefall?

Oil prices have dropped considerably over the last couple years, and this has had a big impact upon oil producing countries in the Middle East. Countries like Iraq, the United Arab Emirates, and Iran have seen big problems within their economies because of the falling prices. Some, like Iran with their nuclear program, have begun developing alternative methods of energy production.
A recent evaluation has shown that there are many other nations that are getting set to release oil reserves right now, and a spike in the supply when prices are already down will only drive prices down even more.

Right now, crude oil stands at about $45 per barrel. Three months ago, it was up over $60. One year ago, it was close to $90. For those that have invested in oil and oil producing companies and economies, this has been very frustrating. Oil has long been considered a commodity that can only go up in price because of the limited supply available. Couple that with increasing global demand, and it seemed like a surefire investment to go long with.

This has obviously not been the case. And while prices are down to half of what they were a year ago might seem like a great place to enter the market or increase your stake in it, this doesn’t seem to be the case right now. If prices do go down even more, a short position is a must. In the commodity markets, this isn’t always easy or cheap to do, though. Futures contracts are expensive and there is quite a bit of risk when dealing with a volatile price structure such as what oil has seen lately.

Oil traders should look for a way to profit off of falling prices in other ways, especially if they do not have hundreds of thousands of dollars in expendable income. Binary options do present an opportunity here as trades can be made for as little as $10 to $25 depending on your broker. It also lessens the risk that traditional futures contracts carry with them. Instead of being locked into a transaction unless you can find a contract buyer, the binary option contract will expire quickly and you will have a decision on your return more quickly. This frees up your money, too, as the average binary option is only open for a fraction of the amount of time of a futures. You can successfully predict price motion on oil for increments of 15 minutes with a good deal of accuracy, which means that you can profit from this several times per day even when accounting for preparation time. With a futures contract, you will need to wait months. If you are trading contracts, you can see much shorter turnaround in your profit timeframes, but the risk is much higher because of the huge amounts of money being traded. In the end, it all comes down to your personal preference, but binaries do open up this marketplace for the average trader that can’t afford to risk too much on futures.

The good news for oil investors is that there have been signs of increases in price for crude. The price has gone by about $5 per barrel in the last three weeks, but this type of oscillation is completely normal. It does show that the commodity is not in a freefall and that there is some stability out there. It’s something that will have a big demand for the foreseeable future, and as long as supply issues are addressed in the Middle East, it is possible for the price to go up. This could be a long road though, and it doesn’t seem likely to happen soon.