Oil has had a rough time recently. To put the declines we’ve seen in the price of oil into perspective, the price of the commodity hasn’t seen a weekly gain for nine weeks; the longest losing streak since 1986. However, that losing streak came to an end on Thursday as the value of the commodity climbed by more than 10% in a single day; making it the biggest single day gain since 2009. Now, the big question is whether or not gains will continue. Today, we’ll talk about what we saw in the market, discuss whether or not the commodity is likely to continue climbing, and talk about how binary options traders can take advantage of the trends.
The Oil Price Climb
With everything we’ve seen from the oil market, it seems strange to see the words oil, price, and climb all in the same heading. However, that’s exactly what happened on Thursday and Friday. Over the course of those two days, oil prices climbed above $45 per barrel; representing a gain of 17% in the value of the commodity. This was the biggest two-day gain that we’ve seen in the price of oil in more than six years!
Will The Price Of Oil Continue To Grow?
In my opinion, the answer is “no”. Unfortunately for the energy sector, I simply don’t think that the growth is sustainable under current market conditions. To understand why, it’s important to look into why oil started climbing in the first place.
I’ve been looking into the climb; and what I found is incredible. The sharp increase in the value of oil on Thursday happened for what seems to be no reason at all. That’s right, last week, there was no substantial change to the supply of oil nor the demand for the commodity; and since supply and demand plays a crucial role, it’s hard to imagine unjustified increases would last for any long term period of time.
On Friday, there was a slight reason to see oil moving upward, but after Thursday’s invalidated gains, we should have seen a bit of a correction instead of a continuation of growth. Nonetheless on Friday Saudi Arabia launched a ground offensive movement in northern Yemen. This raised concerns that turmoil in the Middle East could lead to access issues with regard to oil from the region. Nonetheless, as mentioned above, with such a big climb on Thursday, and no good reason for it, the Saudi offensive on Yemen shouldn’t have caused much more upward movement. With all of that said, it only makes sense that declines are coming soon and the price of oil will fall back below $40 per barrel.
How To Take Advantage Of The Trends
In this particular case, we know that the climb experienced in the value of oil was far less than justified. With that said, the gains aren’t likely to last and declines are likely to start relatively soon. With that said, binary options traders should watch the oil chart incredibly closely. When the value of oil starts to fall, the declines will likely continue for quite some time, giving traders opportunities to take advantage of put options. It’s also important that the value of oil controls the value of several assets. For example, Exxon Mobil’s primary product is oil. Therefore, when the value of oil declines, the value of Exxon Mobil is likely to drop as well. So, knowing that these assets are heavily correlated, traders should take advantage of the movements in oil as well as companies in the energy sector at the same time.
What Do You Think?
Where do you think oil is headed and why? Let us know in the comments below!