Crude oil price - up or down?

The price of crude oil is a subject of interest for anybody, not only for those involved in trading. It affects the whole global economy and has an impact on the consumer prices as well. However, we are here to discuss the crude oil prices from a trader’s perspective. Although it’s not a currency pair, crude oil can be traded from almost any forex broker, since the major commodities are very attractive to all type of traders. You can trade commodities from specialized forex brokers like Etoro, Ava FX or Forex Yard.

After a long time decline in oil price caused by the global economic recession that started one year ago (July 2008) and moved the price from its highest point at $144/barrel to as low as $35 /barrel (November 2008), the oil price has started to recover. The uptrend started on February, and continued at a constant peace until today. The price climbed from $35 to $72 during this 4 months period and this year’s maximum was hit on June 19th at $72 / barrel.

The last four days saw a small decline in the oil price to $67 / barrel as it is now when I’m writing this analysis. Is this decline the end of the four months long uptrend? While it is hard to say where the price will go, a small decline in the price is absolutely normal at this moment. Many traders who had a long position are now marking profits, and this has a direct impact on the market causing a small decline in the price.

What we don’t know is if this decline is the sole result of the speculators who are taking their profits or it has to do with a real slowdown in the demand. The global economy gave signs of improvements and this resulted in an increase of the oil prices, but many analysts doubt that the economy has truly started to recover, and are forecasting a longer than expected recession. Whether the economy is truly recovering or not will have a decisive effect on the future prices of crude oil. The demand for oil is directly connected with the global consumption, and the consumption is related to the economy itself.

My personal opinion is that the current drawback of the barrel price is something technical and has nothing to do with the fundamentals. A small decline is absolutely normal after such a long uptrend, and I think it’s just a small correction. I believe the price will continue to raise and follow the current trend at least in the following months, but it is hard to predict where exactly it will go during such uncertain economic times.

Wherever the crude oil price will go, traders will still be able to profit since they can take both long and short positions depending on their expectations. For people new to trading I recommend Etoro as the easiest trading platform for currencies (forex) and commodities (oil, gold and silver).

Chart source: www.etoro.com