Oil has been having an incredibly rough time in the market as of late. In fact, Wednesday logged the fifth straight trading session in which we saw declines in the value of the commodity. There’s good reason for the declines. Economic conditions around the world are starting to raise concerns with regard to the global demand for oil. Today, we’ll talk about why oil is falling, what could happen moving forward, and what binary options traders should be watching out for.
Why Oil Is Falling In Value
As mentioned above, Wednesday logged the fifth straight day that we saw the commodity decline. There are two big economic stories that are creating demand concerns. Here are the stories…
- US Economic Growth Slows – Recently, a troubling US jobs report created concerns surrounding the state of the United States economy. In fact, the report was so bad that it caused the Federal Reserve to hold off on raising its interest rate; something that would have almost definitely happened had the jobs report been positive. An economic slowdown in the United States could lead to declines in demand among one of the world’s largest oil consuming countries.
- Brexit Fears – Relatively soon, the British people will be voting on the Brexit referendum. The vote will determine whether or not Britain remains as part of the European Union. Recent polls show increasing support for the Brexit, which could lead to global economic turmoil. This is also lending a hand to the concerns with regard to the demand for the commodity.
What Can Happen Moving Forward
The reality is that there are only 2 different directions in which the value of oil can go; either up or down. Here is would would need to happen in order to see movement in either direction.
- Most Likely Scenario – The most likely scenario, in my opinion, is the scenario in which the value off oil continues to head downward. At the end of the day, Brexit polls continue to show increasing support. If a Brexit happens, it will automatically cut off several global trade agreements, leading to massive declines in the demand for oil. It would also likely lead to global economic hardships as it would mean that one of the world’s largest economies would be forced to renegotiate trade agreements. With US economic conditions already slowing, this could lead to a domino affect around the world, much like what we saw in 2008.
- Less Likely Scenario – While it is less likely, there is a chance that oil can also gain in value. Before the US jobs report for the month of May, economic conditions in the United States were heading in the right direction. This could mean that we will see a sharp rebound in the data next month, leading to positive movement in the demand for and price of oil. It is also possible that the British people will vote against a Brexit. If they do so, oil will likely head upward.
What Binary Options Traders Should Watch For Moving Forward
As binary options traders, it is our job to spot trends in the market and exploit those trends for gains. In order to spot trends, it’s a good idea that binary options traders keep a close eye on the two ongoing stories. Watch for economic condition updates out of the United States and news with regard to the possibility of a Brexit. Both of these stories have the potential to create major gains or losses in the value of oil.
What Do You Think?
Where do you think oil is headed moving forward? Let us know your opinion in the comments below!
[Image Courtesy of Wikipedia]