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.
Which tools should be used to complete a technical analysis of the oil price?
The principal tool you will require to complete a comprehensive technical analysis of the oil price is of course a stock market chart. Although it is easy to find charts that enable you to follow the movements of the Brent or WTI crude oil price per barrel in real time on the market, certain charts are more practical than others for a technical analysis.
It is not for nothing that the technical analysis is also called the chart analysis. Here it is used to display the historical or current movements of the oil price to identify trends together with their strength and volatility and that of the market.
You should therefore pay particular attention to the type of chart you will use for your analysis. You can choose the type of curve or line you prefer such as the classic line or Japanese chandelier, and it should display the principal indicators in real time with rapid updates and you can choose the timeline of your chart by changing the time units according to your investment period over the short, medium or long term.
Apart from good quality charts the use of other tools such as an Excel table may be of assistance with your technical analyses.
Important note! The data provided through a technical analysis, even obtained through software or a robot, is not a guarantee of success in your trading. The oil market, as with any other financial market, is unpredictable to a large extent and at present there is no method that is 100% reliable for predicting how this or any asset will move in terms of price. Basing your strategy solely on signals obtained through this method is therefore risky and you should practise great prudence.