King of Saudi Arabia Dies
In yet another example of how the news affects prices, the price of oil surged on Friday after the King of Saudi Arabia died. Saudi Arabia his one of the world’s leading oil producers, and a very wealthy country with a lot of sway in the Middle East. The King had been a proponent of letting oil prices drop for the time being as the country kept their production levels constant. The argument made by the King was that his nation had enough wealth to weather it out for the next year or so, and immediate intervention on prices wasn’t necessary. Now that he has passed away, investors seem to believe that his successor will not follow the same policy.
This can be confusing, because oil futures have still been dropping in price, and the current trending price is under $46 a barrel for a drop of almost 2 percent in the last 24 hours. This creates a great opportunity for those looking for a longer term profit, as the futures contracts are still catching up to where current prices are. The price that went up recently was what people and businesses are paying to purchase oil upfront. This is an immediate purchase, and not a future that will be received in several months. Using this info is something that can give you an edge when you are trading and picking up older contracts from those that might not have this up to date knowledge.
Another thing to consider is a binary option approach. It’s not the same as a futures contract because their is no implied future ownership involved, and this can often be a good thing for smaller traders. There is no pressure of having to actually purchase or supply a number of barrels of crude oil, plus, you can trade in smaller increments without having to worry about what you will do with a couple hundred barrels of oil a year from now.
Most of the top analysts out there are saying that this price spike is temporary as the world reacts to the death of King Abdullah. However, that does not mean that the change will not be felt in the futures market, or even the binary options market. Price changes almost always are felt, and this event is likely to resonate for another day or two before things stabilize across the board. It is important that you stay tuned to what happens next, but it’s pretty unlikely that the new King will do anything too drastic without going through OPEC, especially this early during his reign. One important thing to keep tabs on is whether or not the new King will keep the old oil minister in his position. Ali al-Naimi has been the Saudi oil minister for the past 20 years, and has a lot of experience. He also has a desire to keep things smooth as the country transitions. Changing the minister will likely have an impact on prices as policy shifts away from what it’s been. This will likely hold true even if the changes are minor in nature.
It’s too early to know what oil prices will be a year from now, or even a month from now. It’s also too early to know whether or not the death of King Abdullah will have a big impact on prices a week from now. However, it is something that could have a major impact, so it is something that should be watched if you are interested in trading crude oil prices over the short term. News like this does have an impact, but often it is tough to know just what that impact will be.