One of the most popular commodities t be traded on the MCX has always been crude oil. Being one of the primary sources of energy for human activity in the world, it has been in constant demand since the invention of the internal combustion engine. Apart from it being the raw material used for making petroleum and diesel, it is also imperative for the production of other petroleum based products, LPG, plastics, and bitumen being a few of them.
Crude oil prices have always seen fluctuations based on world events such as wars and recessions, but there has perhaps never been such a sudden drop as we have witnessed on the oil price after the impact of COVID-19 in 2020. This sudden shock has been caused by a huge decrease in the demand for crude oil due to some of the highest consuming countries in the world (The USA being the highest consumer of all) being under lockdown. International passenger flights have also been halted to a large extent, meaning that aviation fuel and fuel for private vehicles is in very low demand.
The fall in oil prices has sent shudders down the spines of commodity traders throughout India and the world over. The question on everybody’s lips is ‘What is the future of the oil market?’ Only time will tell. The absolute priority of the world right now must be to find a way to put an end to the coronavirus pandemic known as COVID-19. Only after we emerge out of the other end of the crisis will be able to watch and observe how the market recovers in the future.
To give you an idea why the demand for oil is at such an all-time low, you need to understand that 84% of the COVID-19 infections and 94% of deaths through COVID-19 have so far occurred in the top 22 oil consuming countries. These 22 nations make up 79% of global Gross Domestic Product. Restricted economic activities, and restricted personal and public travel in these countries had led to this low demand, culminating in low oil prices.
The low price of oil is not all bad news for everyone. For example, those ‘key workers’ who are working at the forefront of the fight against coronavirus, providing invaluable medical and care services, are still allowed to travel and commute in order to perform their daily work. Petrol and diesel prices have fallen dramatically at the pump, meaning that those who use vehicles in their work can see hefty savings in this element of their monthly expenditure. Buildings that are heated with heating oil or use oil-fired boilers can also make savings during this time. Those with the infrastructure in place to stockpile oil and petroleum products may find enterprising solutions to take advantage of the low price. New commodity traders are deciding to jump on the crude oil market and invest in it while the price is so low. Of course they are doing this on the presumption that the price will shoot back up when we finally see an end to COVID-19 related lockdowns.
For any of the savings suggested in the above paragraph to actually make a real-world profit for anybody going forward, the oil price has to rise up again. History has shown us that as world issues pass over and economic activity resumes to normal levels, the demand again rises in line with this. It is highly likely that this will happen in this instance too. However there are still many unknowns. Whether or not a cure or a vaccination for COVID-19 will be discovered, and how long it will take for them to arrive is not known. Whether there will be a second wave of the virus is not known. How long these lockdowns will be in place in their respective countries is not known. There are many speculations from different so-called experts and spokespeople, all with differing thoughts and explanations. The actual fact of the matter is that the world has never seen this virus before and ultimately nobody knows the final outcome. Commodity futures traders may well be able to take advantage of the situation by buying rights to buy oil at future dates when it is anticipated that the price will have risen back to normal or even higher. Since nobody can rightly state whether or when that will actually happen, it may be wiser to consider buying options instead of futures.
To discuss the current situation regarding the low oil prices, or indeed any other aspect of commodity trading during the COVID-19 impacted times, you can always called GWC INDIA. They are leaders in low-price, high-value brokerage, and have a team of professional trainers and advisors who are best placed to provide you with relevant information to help you decide whether you would like to enter the commodity trading world at this rare and opportune time. Similarly if you are already an active trader, they can help you decide what to do with your current stock in order to hedge against risk and preserve your account. +91 80122 78000 is the number you need to put your mind and your stocks in order. GWC INDIA. The caring brokers.