Crude Oil Trading Can Make You A Fortune!

The global economy runs on the supply of oil

The global economy runs on the supply of oil. You must have heard about the Peak Oil Theory. What this theory stipulated is that almost all the known reservoirs of oil have been discovered. No more new oil wells have been left to be discovered and exploited. What this means is the supply of oil in the world is finite and limited whereas it's demand is growing with each year. With the development of nations like China and India, this demand is expected to grow more and more.

Now, the economics of oil prices is simple. With more demand and a finite dwindling supply that is being exhausted with the passage of time, the world is going to see the end of oil in the coming two to three decades. Rising demand and decreasing supply will push oil prices in the range of $200 in the coming years.

We saw a manifestation of this phenomenon, when in the summer of 2008, suddenly crude oil prices jumped from around $60 per barrel to around $150 in just a matter of months. The whole world felt the pain of high oil prices. Transport came to a grinding halt. People started looking for alternates. Alternative energy resources became highly popular. More and more money is being pumped into alternative energy technologies as never before. The prices have come down for the time being due to the global recession that started in 2008. With the end of this recession, demand is going to pick up again and we will again see crude oil in range of $150-$200 per barrel.

But a trader always looks at a situation like this in a different perspective. A trader is always looking for opportunities to make huge profits. Traders don't control the market. Prices in the market are determined by the supply and demand equation. Oil is facing high demand with a dwindling supply over the next two decades. This is not in the hand of any one person. So, as a trader, this is an opportunity that can make you a fortune if you are able to position yourself in it at the start of 2010!

You can trade crude oil by investing in oil companies. They are already over invested. You can trade oil stocks, oil ETFs, oil mutual funds but the best method to trade crude oil is to trade crude oil futures. Crude Oil Futures contracts get traded on the New York Mercantile Exchange (NYMEX). If you don't futures trading, you can learn it in the next two months by paper trading futures contract. Position yourself for the great oil shock that is coming in the next few years perhaps it may start in 2010!

by: Ahmad Hassam

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