## Opportunities for Crude Oil Trading Amidst Market Volatility

2020 was a year full of volatility for the global crude oil market. Looking back at history, never before has WTI (USOIL) plummeted from $30/barrel down to $20, and the May futures contract even dropped to -$36.9/barrel – an unprecedented event. This triggered a "landslide" when Brent (UKOIL) lost 25% of its value and WTI lost 53% in a single trading session on 22/04. But the question is: is this the "golden" time for investors to enter the crude oil market?

## Four main factors driving crude oil prices to record lows

**Unprecedented decline in global demand**

Since the Covid-19 pandemic erupted, energy consumption demand collapsed. According to the US Energy Information Administration (EIA), oil consumption in March 2020 decreased by 11.4 million barrels per day compared to the 2019 average. Forecasts for 2020 show global oil demand will decrease by 6.5% – the largest decline in energy history since the 1980s. According to basic supply and demand laws, when demand drops sharply while supply remains abundant, prices inevitably fall to record lows.

**US shale oil production continues to increase**

From 2015 onwards, shale oil extraction technology helped the US become the world's largest oil producer by 2018. However, amid rapidly declining demand and production capacity, US oil storage pipelines quickly filled up, leaving no room for consumption. This caused US WTI prices to free fall due to oversupply.

**OPEC remains hesitant to cut production**

While the US continues to increase output, OPEC is reluctant to lose market share, so member countries like Saudi Arabia and Russia have not made significant production cut commitments. This policy divergence among major producers prolongs supply-demand imbalance, causing crude oil prices to fluctuate unpredictably.

**US dollar appreciation**

All crude oil transactions are settled in US dollars. When the dollar appreciates by 25%, it offsets a 25% decrease in oil prices. In the context of global economic instability, the US dollar is seen as a "safe haven," adding pressure on oil prices. However, as global economic support policies take effect, the US dollar may weaken, helping crude oil prices rebound.

## Crude oil trading strategies for speculators

**Understanding negative prices and profit opportunities**

One point to clarify: negative oil prices (-36.9 USD/barrel) apply only to physical oil traders, not individual investors trading via derivatives. In the near future, as the economy has not fully recovered, oil demand will remain low, creating opportunities for trading crude oil with significant price volatility. Speculators can leverage this volatility to profit.

**Short-selling during downward trends**

If you believe oil prices will continue to decline, you can use CFD tools to short-sell. This is one of the advantages of trading crude oil via CFDs – you can profit from both rising and falling markets.

**Bottom-fishing with technical analysis**

Sooner or later, crude oil prices will recover because they never truly go "negative" like physical oil. Wise speculators should use technical analysis to identify the price zones most likely to bounce back. Currently, oil prices fluctuate between 10% and 30% within a trading session, creating good conditions for leveraged trading.

## CFD – The ideal tool for crude oil trading

To profit from crude oil volatility without owning physical oil, the (CFD) instrument is the top choice for individual investors.

**How it works**

When trading crude oil CFDs, you have two options: if you predict prices will rise, place a Long (buy) order at a low price and close the position when prices increase; if you expect prices to fall, place a Short (sell) order at a high price and buy back when prices drop. This way, regardless of whether the market goes up or down, investors have the opportunity to profit.

**Cost structure**

The three main fees involved in CFD trading are: Spreads (spread), Commissions (trading fees), and Swaps (overnight fees). Each trading platform has different fee levels, so choosing the right one can maximize profits on each trade.

## Why CFD is the optimal choice for oil investing

**No physical storage needed**

Trading crude oil via CFD frees you from worries about storage and management of physical oil in warehouses.

**Flexible in both market directions**

Not limited to buying only when prices rise. You can short-sell when prices fall, expanding profit opportunities.

**Leverage to multiply profits**

With a small capital, you can control a larger contract. For example, with $1 you can trade a contract worth $100, increasing potential profits by 100% - 200%.

**Lower risk compared to other tools**

Compared to futures or options, CFDs have smaller trading sizes, resulting in lower risk per trade.

**24/5 market with no time restrictions**

Crude oil CFD trading is open 24 hours, 5 days a week. CFD contracts also do not have expiration dates like futures or options, allowing you to open/close trades anytime.

## Conclusion

The crude oil market is one of the most sensitive energy markets with highly attractive volatility opportunities. Numerous ongoing factors continuously influence prices, from global supply and demand to currency exchange rates. Investors can choose many paths: buying exploration company stocks, trading futures contracts, options, oil ETFs, or trading crude oil via CFDs. Among these options, CFDs remain the fundamental, accessible, and most effective tool to start your crude oil trading journey.