Oil on Forex. The designation of oil on "Forex"

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

The foreign exchange market is very sensitive to quotations of raw materials and metals. The reason for the dependence is that currency transactions affect raw materials. On the other hand, the value of a currency also depends on the value of raw materials and metals. That is, for successful trading, it is important to always understand these dependencies. And first of all, it is important to understand how oil affects Forex, since it, especially now, is a leading player.

"Forex" and black gold

Oil plays a leading role in the stability and competitiveness of the economies of many countries. Historically, the dollar and oil are two concepts that are interconnected, because it is the United States that extracts and consumes a huge amount of this raw material.

Oil on the Forex market has long been loved by traders as the best tool for trading. Today, most Forex brokers provide the opportunity to trade this commodity.

Common notation

The price of a barrel of oil is now known to most,because it has a direct impact on all areas of life. Therefore, it is important to understand how oil works on Forex and understand all the intricacies of the economy.

Oil, as the most demanded raw material, is sold in colossal volumes at auctions, where price quotations for a barrel are formed, contracts are concluded. The cost of oil is formed on the main stock exchanges:

- London;

- New York;

- Singaporean.

When studying the designation of oil in Forex, it is important to know the following:

- several brands of this raw material participate in the auction: Brent, Light, WTI;

- the value of one lot is equal to one hundred barrels;

- spread level is in the range of $3-$15. It all depends on the broker.

How is oil indicated on Forex? Latin. You will find the Brent brand in quotes as UKOIL. WTI brand – USOIL.

In addition to transactions based on the difference in the cost of raw materials (CFD), it is possible to trade contracts for delivery in the future (futures):

- contract for the supply of a barrel of Brent crude oil is designated as BRN;

- contract for the supply of a barrel of Light Sweet crude oil is designated as CL.

These are common notations. This does not mean that the broker cannot enter its own symbols and symbols.

In addition to the letter names of the brands, in the common designation there is also a letter that indicates the month if you work with fixed-term contracts, and a number that indicates the year of delivery.

For example, BRN5 means that Brent oil will be delivered in June (N) 2005 (5 being the year of delivery).

Types

"Forex" gives you two types of contracts to choose from:

- Foggy Albion raw materials are traded under the Brent brand;

- oil from West Texas (USA).

UK oil is a blend of low sulfur crude oil. This is "light" oil. It is mined in the North Sea. The cost of a barrel exceeds the average price of OPEC.

Oil produced in the US is much more expensive because it has a more refined chemical composition, sulfur is practically absent.

Who is involved in trading

The Forex oil market is transnational. Entire countries, international corporations, small companies, private traders meet on it. Airlines also have the opportunity to trade this raw material to prevent the growth of its cost.

On the other hand, foreign exchange market participants make money on oil quotes (the difference between the buying and selling prices). Like the foreign exchange market, the commodity market is influenced by many factors:

- political;

- economic;

- financial;

- social and others.

How things work

Oil trading on "Forex" is against the US currency. The cost is indicated for 1 barrel of crude oil. The price is adjusted based on supply and demand. It may change within one trading day.

Transactions are carried out directly betweenparticipants: the seller and the buyer. As with any other commodity, there is no physical transaction. This is due to the speculative nature of the transaction. Quote prices can be seen on most trading platforms used by traders. Can be seen in the form of spot prices.

Crude oil is the main indicator of demand. In other words, an increase in demand for oil in the long run can lead to an increase in gasoline prices. Traders understand the rapid growth of the economy as an increase in demand for raw materials, that is, the cost of a barrel of crude oil. Stagnation leads to the opposite effect - a fall in the price of a barrel.

Should I trade oil

Given that oil in Forex is a relatively new area, it has advantages:

- Trading this commodity will help you diversify your investment portfolio and generate additional income.

- Most currencies and raw materials are directly dependent on the cost of oil. When studied in detail, this will help in studying the direction of movement of prices for this raw material. This will provide a profit opportunity.

- The cost of a barrel at Forex does not have high volatility. The price changes within one business day. A trader can benefit from this by identifying price changes.

What is the result

With the help of the US currency, oil has a strong influence on Forex. You can often hear in the news that the dollar has "supported" oil, or oil has "pressed" the US dollar. Following price fluctuationsof this raw material, the US dollar is also corrected. Following the dollar, the currencies of other states are also corrected.

That is, oil quotes at the expense of the dollar affect the auction. This must be understood, especially if there are no obvious prerequisites for movement, and the raw material market is “standing” in anticipation of factors.

Trading in the stock market in commodities is a good way to invest, and with relatively low risks.

The currency market is special. It is stable as long as the economic situation in the country is stable. Economic growth contributes to the growth of the national currency. Stagnation in development or crisis reduces the exchange rate. Let's form a series of conclusions:

- the value of the currencies of the country that produces and exports this raw material is growing;

- the currency of states that import oil is lower;

- those states that export oil are in a better position than those dependent on imports.

Designation of oil on "Forex": UKOIL and USOIL are Brent and WTI oil respectively.

Oil trading is a popular trading area. Its development is on a par with the trade in precious metals, currency. But do not forget that before you start trading, you need to develop a strategy, work it out on demo accounts or by playing small lots. And only then enter the real market. Because here you can both win well and lose everything quickly.

Be successful!