The markets where the oil price is quoted:
Let us first look at the stock markets on which the crude oil price is quoted. We find of course the oil spot market; that is the trading market where transactions of physical oil are completed. It is on this market that the oil companies and refineries buy and sell barrels.
However the market that interests us as investors is the international market with its two principal stock markets; the NYMEX (New York Mercantile Exchange) and the ICE Futures Europe (Intercontinental Exchange in London). These markets enable the non-physical exchange of crude oil, in other words the barrels are not physically traded.
Variations in the oil price observed on the market charts correspond to the taking of positions by different traders. It should be noted that the oil price generally discussed online is that of WTI or Brent.
The elements that influence the technical analysis of oil:
Variations in the price of crude oil observed in technical analysis are mainly due to the factors of supply and demand.
Oil supply depends on the oil companies responsible for the extraction of this commodity.
OPEC, or the Organisation of Petroleum Exporting Countries, is one of the main actors. This is a group of producing countries that seek to regulate the price of oil through a system and balance of production quota. This regulation directly influences the rates of oil on the financial markets. A reduction in the quotas will therefore tend to raise the price per barrel of crude oil.
Another factor linked to the oil supply that influences the price concerns the discovery of new oil deposits and the recent shale production.
It is of course by comparing supply and demand that we obtain the most pertinent information concerning movements in the oil price. This essentially depends on the industrial strength of the importing countries. This is therefore directly linked to the economic growth of these countries.
How to complete a good technical analysis of oil:
As with all financial assets, to complete a technical analysis that is pertinent to the oil rate it is necessary to use both short term and long term charts. For this, it is considered preferable to use the candlesticks charts.
To summarise, do not hesitate to use the different technical indicators offered freely by the brokers such as the support and resistance levels, moving averages and pivot points.
Our advice for successfully completing your oil analysis:
To complete a successful oil technical analysis we recommend you follow these simple tips:
- Firstly, depending on the type of trading that you plan to implement (short, medium or long term), you will should select a suitable period on the charts you use.
- The choice of indicators is also important. Certain indicators will demonstrate the probable direction of a trend, others will show the strength of that trend while others will alert you to a possible reversal or acceleration of the current trend. It is highly recommended to combine the results of several indicators to obtain an incisive view of the current and future price trend.
- Finally, you should of course take into account the news and fundamental data of the markets. In fact, certain major events such as the publication of American oil stocks, decisions taken by OPEC and movements in the American dollar rate, all of which can influence the price per barrel of crude oil independently of data revealed through technical analysis.
Using this complete technical analysis of oil together with fundamental analysis you will be in a position to implement an optimised strategy.