US Crude Oil (USOIL) Technical Analysis
Crude oil, commonly known as petroleum, is a liquid found within the Earth and is comprised of hydrocarbons, organic compounds and small amounts of metal. It’s often referred to as “black gold.” It’s nicknamed as US Oil, CL & WTI.
Breaking Down "WTI Crude Oil"
Crude oil is one of the most demanded products and its rates have risen significantly in recent times. Two main benchmarks for pricing crude oil are the United States' WTI (West Texas Intermediate) and United Kingdom's Brent. The differences between WTI and Brent involve not only price but oil type as well. WTI produces crude oil with a different density and sulfur content.
The demand for crude oil is dependent on global economic conditions as well as market speculation. Crude oil prices are commonly denominated in US dollar.
History and Background of Oil Extraction and Consumption
Now that we know where the most ‘black gold’ is found, let’s briefly look at where and when oil was first extracted in reasonably large quantities.
In 1859, a man drilled a hole on a farm in Pennsylvania and struck oil at about 70 feet. The oil quickly filled the gap.
Since that day, oil extraction quickly increased in the region and three years later the oil entrepreneurs were extracting this commodity at an annual rate of about 3 million barrels.
Back then, only a specific part of the unrefined oil was utilized – kerosene, which was used for lighting.
Soon after Thomas Edison invented the incandescent lightbulb in 1879, the demand for kerosene and consequently, oil, began to deteriorate.
Soon after this, however, cars driven by internal combustion engines appeared on the scene. The demand for gasoline surged, and within a decade it was selling faster than kerosene.
By 1956 Americans owned more than 50 million cars. The demand for gasoline was driving oil extraction activities at a rapid pace. Military exercises also consumed a lot of oil.
Of course, oil extraction wasn’t limited to the United States alone. As the demand for oil increased, oil extracting activities spread to many other places in the world which include Mexico, the Middle East, Canada, and Russia.
In this modern time, millions of barrels of oil are extracted daily to supply the world’s massive energy demand.
Let’s take a look at which countries produce the most oil.
Countries With the Largest Oil Reserves
The Middle East is incredibly rich in oil reserves and a substantial part of the world’s oil is trapped in this region.
However, the country with the largest proven oil reserves in the world is Venezuela. Let’s take a look at which states have the largest reserves of unextracted oil. (Statistics at the start of 2017):
Venezuela: 300.878 billion barrels.
Saudi Arabia: 266.455 billion barrels.
Canada: 169.709 billion barrels.
Iran: 158.4 billion barrels.
Iraq: 142.503 billion barrels.
Kuwait: 101.5 billion barrels.
United Arab Emirates: 97.8 billion barrels.
Russia: 80 billion barrels.
Libya: 48.363 billion barrels.
United States: 35.23 billion barrels.
How to Trade Crude Oil?
Trading a contract for difference (CFD) on crude oil is not complicated. By buying or selling a crude oil CFD in response to one of our crude oil trading signals, you participate in the price movement of this black gold without actually owning it physically. It’s traded exactly like a currency pair. The only difference is that you’re buying or selling crude oil against the US dollar.
What Determines the Crude Oil Exchange Rate?
Events that impact or have the potential to change the supply or demand of oil tend to move the oil price.
Obviously, production and consumption data also impact the oil price. For example, if the United States’ crude oil inventories reveal that there’s recently been a strong draw from US energy reserves, we know that energy consumption, and hence, the demand for oil has increased.
An increase in the demand for oil will put upward pressure on the oil prices, except if oil supply increases at the same rate, or faster.
Conversely, when data is released which shows that the demand for oil is waning, it could put downward pressure on the oil prices.
News on OPEC’s (Organization of the Petroleum Exporting Countries) oil production can have a significant impact on the price of oil. For example, if they decide to cut oil production, it can cause the oil prices to rise sharply in a short period as investors and speculators quickly buy oil to gain from the expected rise in oil prices due to the anticipated reduction of oil supply.
Crude Oil Specifications
The Crude Oil is traded in amounts denominated in the US Dollar.
Standard lot Size: 10 Barrels.
One pip in decimals 0.01
Pip Value: $1
Profit/Loss = (Bid Price – Ask Price) X Contract Size X Number of Lots