Crude Oil  Big Profits Are Being Made Are You Being Left OutCrude Oil Big Profits Are Being Made Are You Being Left Out

Have you missed out on the recent huge move in crude oil? If you have and you are wondering if crude oil will stay high then this article is for you.

Here we will outline the factors driving crude oil prices and how you can get involved and make huge profits, even if you have never traded before!

Black gold

There remains no viable substitute for crude oil as an energy source at this point in time and supply is unable to keep up with demand.

Here are the factors driving prices higher:

1. Demand

Ten years ago there was a widespread belief that oil demand was unlikely to ever resume any significant long-term growth, but it has and prices have surged higher.

The reason for this is the prosperous countries, led by the US, have enjoyed solid economic growth in spite of higher oil prices.

Two countries have joined the established economic super powers, India and China and their thirst for oil to fuel their huge economic expansion has seen prices soar.

2. Demand has not been restrained by price

High oil prices have done little to restrain growth in demand and are unlikely to in the near future, as energy prices are far less in terms of a percentage in terms of production costs than they were say in the 70s.

High oil prices are an impact on economic growth, but this impact has been over emphasized by most traders.

Those traders who said oil would never exceed $60 a barrel were dead wrong!

3. Supply Can't keep pace

Ten years ago there was a widespread belief that oil demand was unlikely to ever resume any significant long-term growth.

Global oil demand however crossed 70 million bpd for the first time in 1995 after remaining in a tight price range for the previous 10 years.

Over the next nine years, global oil demand grew from 70.0 to 82.4 million.

The reasons demand outgrew supply, was broad based and had been building for years.

The major industrialized countries, led by the US, enjoyed strong economic growth and were joined by new economic super powers, such as china and India as we noted earlier, but demand was broad based across the whole world

The theory that higher oil prices would quickly be met with a surge in supply has not materialized.

The problem has been developing new oil fields. A large percentage of the world's oil still comes from discoveries that were made decades ago and these fields are running out fast.

New fields are opening but they tend to be small and are also running out quickly.

Supply has lagged demand and needs time to catch up but there is also another major problem with the supply of oil and this is after it has been drilled.

4. Refining & transportation capacity

Lack of spare capacity exists at every step of the supply chain, not just in drilling and actually getting oil to the consumer is proving problematical.

The refineries who deliver the oil to the consumer and the world's network of crude oil pipelines are now operating at nearly 100% capacity and for most of 2005, the world's tanker system operated at full capacity.

The fleet of high-quality drilling rigs is now close to 100% utilized and a high percentage of the offshore drilling fleet is becoming obsolete.

The aging rig fleet must be expanded and upgraded and fleet expansion is also required to drill more wells and fight the growing decline in capacity.

The supply capacity to get oil from the wells to the consumer is not seen important by many traders, but it is of vital importance and no changes are seen in the sort term.

5. Geopolitical events

The mere threat of disruption to energy supply is enough to send prices soaring.

Investors are mindful of issues such as terrorist attacks, nuclear developments in Iran and North Korea, the volatile situation in Iraq, a change of leadership in Saudi Arabia etc.

With the US taking a hawkish stance in relation to world problems and particularly the Middle East, the uncertainty to the supply chain this creates will underpin oil prices. Getting in on the action for huge profits!

High oil prices are here to stay

While oil prices will have pullbacks and corrections to the downside, high oil prices are here to stay and you can take advantage for huge profits.

The way to do this is to buy the pullbacks when they occur and look for higher prices as supply and demand factors keep prices strong.

Trading oil with limited risk

The best way to do this for traders is options that offer unlimited profit potential and limited risk.

Options are simply the best way to take advantage of what is one of the biggest bull markets in recent years. Change your financial future today and trade crude oil for huge profits!

by Sacha Tarkovsky
References and Bibliography

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