Group presentationstopic oil trading how to invest in oileffectively

Bộ Giáo dục Đào tạo Trường Đại học Kinh tế Quốc dân ~~~~~~~~~~ GROUP PRESENTATIONS Topic: OIL TRADING - HOW TO INVEST IN OIL EFFECTIVELY? Class: Corporate Finance CLC 61B Lecturer: cô Nguyễn Ngọc Trâm Group members: Nguyễễn Minh Đức Nguyễễn Tuấấn Huy Khương Thành Nam Nguyễễn Ngọc Bình Nguyễễn Anh Phong Hồồ Sĩ Cường Vũ Hữu Nghị Hà Nội, 1/11/2022 Table of content: OIL TRADING - HOW TO INVEST IN OIL EFFECTIVELY? I General information So what makes the oil market attractive? What kind of oil is traded? Oil Market in recent years II Tools for trading oil Using Oil CFDs Steps to trade crude oil through CFD Trading method that maximizes profit often applied by investors III Is Trading Crude Oil CFDs a "Smart" Investment Option? Potential risks when trading Crude Oil CFDs OIL TRADING - HOW TO INVEST IN OIL EFFECTIVELY? I General information Crude oil is considered the number one commodity in the world because it is used to produce the fuel needed to operate many different types of vehicles At the same time, it is also used to produce lubricants, paraffin, asphalt, and fuel oil, used in machinery maintenance, and road construction and is considered a source of heat energy and as a fuel for generating In addition, crude oil is also used to produce many synthetic materials However, oil's most important role is to generate energy Up to now, crude oil accounts for 1/3 of the world's energy supply It is without a doubt the most traded commodity in the world, providing investors with an opportunistically rich market with extreme liquidity So what makes the oil market attractive? - First, crude oil is the most important global commodity and a barometer for the economy The importance of this market makes trading smooth and continuous - Second, transactions can take place almost 24 hours a day This is also important when it comes to transaction costs - Third, prices act as stock indexes, which can reflect the economic situation But for oil, supply and demand are more important As a result, some investors choose oil because it better reflects the current situation than stocks What kind of oil is traded? - There are two types of oil used as benchmarks for oil pricing: WTI oil and Brent oil WTI West Texas Intermediate, extracted in the United States, Texas Due to the sulfur content below 0.24%, it is called sweet and light oil because of its low density WTI crude oil is the underlying instrument for futures contracts on the New York Mercantile Exchange (NYMEX) It is characterized by high quality, one of the highest in the world · Brent Coming from 15 oil fields located in the North Sea The low sulfur content, less than 0.37%, shows that this is a sweet oil and the low density should be described as light, ideal for producing diesel and gasoline It is estimated that nearly 70% of global oil trade is done in Brent Brent crude oil futures contracts are listed on the London Intercontinental Exchange (ICE) * WTI & Brent Oil Price Correlation · Traditionally, WTI is more expensive than Brent, but as oil drilling and hydraulic fracturing technology improve, WTI now tends to be cheaper This is also known as the American shale revolution because reducing the cost of oil production also reduces America's dependence on oil imports · The prices of the two oils are highly correlated, but if one of them depreciates and the other appreciates, price anomalies can occur For example, in February 2011, the difference between WTI and Brent prices was more than 15 USD (WTI was trading at 85 USD/barrel and Brent was trading at 103 USD/barrel) Oil Market in recent years Crude oil is like a consumer good, so once the demand increases, the price will of course go up Conversely, when demand decreases, the price will decrease Therefore, investors can see the demand for oil from the overall world economy For example: At the time of the strong outbreak of the Covid epidemic, when the governments of all countries applied social distancing measures, people were limited from going out or traveling, the activities of air transport and vehicles were less active, so the demand for food and transport services was limited leads to the decrease in oil demand The proof is that the price of gasoline at the time of the epidemic dropped sharply Document continues below Discover more from: International Investment Đại học Kinh tế Quốc dân 26 documents Go to course Chapter How Securities Are Traded 11 International Investment 100% (3) Tran Tu Quyen 11173965 International Investment 100% (1) BAI TP TAI Chinh Doanh Nghip NANG CAO 19 International Investment 100% (1) Multiple Choice Questions 13 International Investment None Assignment 24- Apr 2020 International Investment None ETFS FUND Financial Investment NTHA 16 International Investment None Since the supply of crude oil is determined by the major oil-producing countries, political tension with one of those countries can cause major problems If there is war or conflict in an oil-producing region, crude oil inventories could be threatened, and that could ultimately directly affect oil prices Typically, when the war between Ukraine and Russia happened recently, it caused a peak in gasoline prices Some information from recent days: Saudi Arabia's Foreign Ministry on October 12 emphasized that cutting oil production is a purely economic decision, aimed at stabilizing world oil prices According to the latest statement from the Saudi Foreign Ministry, Riyadh believes that cutting oil production serves the interests of both consumers and producers The alliance between the Organization of the Petroleum Exporting Countries (OPEC) and several outside producers, known as OPEC+, agreed on October to cut crude oil production by about million barrels per day from November The move was met with resistance from the United States According to the Reuters news agency, Saudi Arabia's foreign ministry said the OPEC+ decision considering the balance of supply and demand was aimed at curbing market volatility "The government completely rejects claims that the oil production cuts are not based on facts and are far from its purely economic context," the statement said Accordingly, Saudi Arabia has made it clear through ongoing consultations with the US authorities that all economic analysis indicates that delaying the OPEC+ decision for one month will have negative economic consequences Saudi Arabia is also looking to downplay its centrality, arguing that the decision is unanimous among OPEC+ members While gasoline prices are starting to rise again in the US, the OPEC+ decision has aggravated the fuel price problem, especially ahead of the US midterm elections For President Joe Biden, the decision is particularly negative after he has worked throughout the summer to mend relations with Saudi Arabia According to the Oil Price website, the White House warned that cutting crude oil production and the consequent increase in oil prices would lead to three particularly dangerous outcomes for the world, such as causing global inflation, Russia's budget revenue will increase significantly since Russia a major exporter of crude oil and gas, the midterm elections in the US in November will be unfavorable for Mr Biden, making his government less able to deal effectively with the challenges from the security protocols established by Russia and China Meanwhile, some Biden administration officials are concerned that the plan to impose a ceiling on Russian oil prices could backfire Russian Deputy Prime Minister Alexander Novak said Russia is expected to maintain oil production at 9.9 million barrels/day in October as the West imposes a ceiling on Russian oil prices President Vladimir Putin called the decision "a threat to billions of people around the world" He emphasized that Russia will not sell oil to countries that impose a ceiling on Russian oil prices According to Bloomberg, some US officials are concerned that the OPEC+ production cuts have increased volatility in the oil market and that the US-led move to impose a ceiling on Russian oil prices could cause oil prices to spike II Tools for trading oil Using CFD CFD is an acronym for Contract For Difference, which means contract for difference Basically when trading CFDs you can buy and sell an exchange rate of the product without actually owning it This type of transaction will take place between you (the buyer) and the broker (the seller) and the product is the right to buy and sell a certain code (be it securities or commodities or anything on the market) ) Trading CFDs makes it possible for investors to make a profit regardless of whether the product increases or decreases in value On the contrary, they can also lose money even if the product price increases This is a form of derivative securities that is attracting a lot of attention from investors recently in Vietnam And yet, CFD also helps us not to spend too much capital but can create very high profit margins, sometimes up to 50% For example, a stock X has a price of dong You buy 1000 shares of X will have to spend a total cost of 2000 dong That is not counting any additional fees or commissions If you choose to trade CFDs, you only need to make a deposit (called a margin) for 400 VND, equal to 1/5 of the amount of the stock purchase in the usual way when the stock price increases by 10%, the total amount you have will increase to 2200 dong, ie the profit is only 10% But when investing in the form of CFD, the profit earned is 200 VND The profit margin is up to 50% times the normal form Small investment but high profit is the dream of every investor Steps to trade crude oil through CFD To trade Crude Oil through CFD, you need to follow these steps: • Create accounts on CFD trading platforms (usually these exchanges have a full portfolio from stocks to commodities, precious metals, currencies ) • Download apps to track on mobile devices • Perform demo trades first These transactions are virtual using virtual currency, mainly to familiarize you with the tool and the operations If there is a mistake, there is no economic loss • Deposit real money into your account • Start real trading on exchanges (including the steps of analysis, selection, contract CFD) • Close the deal Trading method that maximizes profit often applied by investors Trading method is very important You need to build a strategy, assess the risk well There are typical trading methods as follows: – Technical method: you analyze the oil price chart indicators - Basic method: read and analyze world economic and political information, study reports to assess the supply and demand of crude oil - Wave analysis method: analyze price movements through the chart to get an overview, market structure, from which to find the appropriate time to enter and exit the market These methods combined with trading deadlines produce variations such as the following: • Short term fundamental strategy: focus on short and fast trade execution, executed on lower timeframes These type of investors use economic forecast announcements • Long-term fundamental method: Investors following this method prefer long-term reports and forecasts, prioritizing the establishment of long-term investments Changes will be slower due to fewer transactions being formed but will reduce risk • Wave analysis and medium & long term: It is easier to analyze long term waves than short term waves Because the short wave type changes quickly, it is only effective for experienced investors Long waves usually appear on the 1-hour chart or higher • Medium-term technical analysis: These investors often use the information of moving averages, Fibonacci and oscillators, trend lines technical analysis can be used for long term trading and higher timeframe charting • Short term technical analysis: In this case oil price moves faster on less time frames than medium term analysis That's why investors often use automated indicators like Parabolic, Keltner Ca and Pivot Points that save them from having to manual calculations • Mixed method: many investors want to use many different methods to optimize profits So they can combine or all methods mentioned above But when there are too many metrics and tools, they can become confused, unable to make decisions Besides these analytical methods, when investing in crude oil, there are many other things to keep in mind The factors that most affect oil prices are wars, natural disasters, instability, economic fluctuations, and global epidemics Must update news daily, hourly, to catch any information as soon as possible III Is Trading Crude Oil CFDs a "Smart" Investment Option? Crude oil is a commodity that is greatly affected by supply and demand Basically, when the supply is abundant, the price of oil will decrease, and vice versa, when the supply is reduced, the price of oil will increase The supply and demand of oil and gas is strongly influenced by political factors Countries that own large oil reserves often have unstable politics, such as in the Middle East, Russia, Not to mention conflicts of interest also cause large oil and gas producers to increase or decrease output in order to increase production impact on prices For example, Saudi Arabia and OPEC each raised crude oil production to a peak point to keep oil prices down, against the competition of US shale oil Currently, the world is paying attention to Russia's military campaign in Ukraine The West implemented sanctions against Russia to oppose this action, which mainly hit the country's oil and gas industry Russia is one of the world's largest oil and gas exporters, so this contradiction has caused oil prices to rise to the highest levels in history The constantly fluctuating oil price is both a challenge but also an opportunity for investors Crude oil is the most important commodity, as an indicator of economic forecasting The oil and gas market is also traded like stocks but presents a better current situation Crude oil in particular is highly dependent on the world political situation So if you follow political developments carefully, you can recognize good investment opportunities from this item Another factor that shows that investing in crude oil is beneficial is the fact that the price of this commodity is very volatile In the past few years, the price of oil has sometimes dropped to 28 USD/barrel, but after the crisis in Ukraine, it has reached more than 120 USD/barrel This volatility is very beneficial for exchange rate-biased investors Therefore, investing in crude oil has a lot of advantages to bring big profits Potential risks when trading Crude Oil CFDs Because the price of crude oil depends a lot on the global political and economic situation Therefore, the first risk when trading crude oil is delay or misinformation When you not have timely and accurate information, it is easy to miss the best opportunities and make mistakes that cause capital loss The next risk is emotional There is a good saying, which means: "People make decisions by emotions and explain them by reason" But often too much emotion is detrimental to investing It obscures your vision leading to easy mistakes The third risk is when using financial leverage It's a double-edged sword If used correctly it can increase your profits many times over And when used incorrectly, leverage will make you big losses And finally, because it is a derivative product, CFD is still very new in Vietnam The control of the authorities with this type is not really tight Customers should be careful to only trade CFDs on reputable exchanges