Make Cash Today

If you are well seasoned in the discipline of forex trading then you may not yet have considered trading oil.

Many forex brokers now also offer the ability to trade oil and the good news is that most forex systems and forex software works just as well for trading oil as they do for trading currencies.

Now I am not suggesting that you should abandon your currency trading activities, but oil gives you an additional instrument to consider when searching for a high probability set up.

So what do we know about oil?

Well we know that it is black and comes from below the surface of the earth. We also know that it is becoming increasingly more difficult to find new easily extractable oil deposits and therefore extraction costs are likely to continue to rise for the foreseeable future.

Demand continues to rise and is likely to do so for at least the next few years or longer. Both India and China have embarked on ambitious technological development programs which will continue to increase their demand for crude oil and that trend shows no signs of slowing down.

At the same time that demand is rising, supply rates have becoming static or have even declined and few substantial new sources are likely to become available any time soon.

Saudi Aramco is the state-owned national oil company of Saudi Arabia. It is the largest oil corporation in the world with the largest proven crude oil reserves and production.

Mr Sadad al-Huseini – the former head of exploration and production at Saudi Aramco, stated that global production had reached its maximum sustainable level and that output would begin to fall within the next several years.

In an exclusive interview he said: “…. oil production has reached a structural ceiling determined by geology rather than geopolitics.

He also said: “…..the technical floor for the price of oil will rise by $12 annually for the next 4 to 5 years as new fields become increasingly costly to exploit”.

According to Mr al-Huseini the technical floor – the basic cost of producing oil excluding factors such as geopolitical risk and hedge fund speculation – is currently around $70 per barrel. This means that the price of oil could exceed $105 in 2010 and $125 by 2012.

Mr al-Huseini said that Saudi Aramco plans to raise production capacity to 12 million barrels per day by 2012 represented “an achievable number”.

Saudi Aramco had announced oil investments of $55 billion between 2003 and 2011, but Mr al-Huseini cautioned that since some of the new production will come from entirely new fields “how the reservoirs will respond can be only determined once they start producing”.

Because of the potential for oil to become an unsustainable fuel, technology has been shifting towards the development of other forms of energy, but this will be a slow and difficult change. It is extremely unlikely that the new technologies will have a great deal of influence in the shorter term.

Crude oil is not merely a physical commodity that largely fuels the world. It has also become a valuable financial asset – largely for the reasons stated above, and is sold in electronic exchanges by traders around the world, because of it’s desirability as an investment vehicle.

So if you want to add another string to your trading bow, then perhaps trading oil with a strategy of buying on the dips could be well worth consideration.