This post is also available in: German
Every oil trader should know the other market participants. Price fluctuations are the result of (trading) decisions from all parties combined, and especially the bigger ones got a lot of influence on price setting. Keep and eye on these parties and try to discover their (secret) agendas. Understanding their decision set can help you predict their next move.
Producers
The oil producers posses a lot of power to influence market prices and they are not afraid to do so. The OPEC group is the most important one, accounting for two-thirds of the world’s oil reserves and about one-third of the total oil production. Meetings are held on a regular basis in which oil ministers of the OPEC countries gather to determine future policy. When these guys are unhappy about the current oil prices, they are likely to cut production to limit supply. Keep an eye on their meetings, and the statements by the individual members that could predict the outcome of the next meeting.
Developments in each of the producing countries can result in large price fluctuations. It can be an act of terrorism, political instability, natural disasters, or a rising conflict that initiates a price rally. Be sure to always keep your eye on the news, especially for events in the biggest oil producing countries; Saudi Arabia, Russia, United States, Iran, China, Mexico, Canada, United Arab Emirates, Venezuela, Norway, Kuwait, Nigeria, Brazil, Algeria, and Iraq.
Consumers
When demand by oil consumers increases, the price of a barrel will go up. Especially the big oil consumers, the airline- and transport sector, influence prices significantly. When the airline industry is having a hard time, then the price of oil is likely to go down. Keep an eye on the quarterly reports by the big airline and transport companies, especially on their business outlook for the rest of the year.
Another important group of consumers is the car drivers. This can be seen in the correlation of oil prices with the US driving season. The extra miles driven during the summer holidays creates an extra demand for oil and can push prices up.
Refiners
The oil refineries (like Texaco, HETCo, Valero) are processing the crude oil into useful products such as gasoline, diesel, and kerosene. When refineries are unable to continue operations, fear will hit the market and prices are likely to go up. This effect is strongly reflected in the Atlantic hurricane season (August-September). When hurricanes are likely to hit production facilities and refineries in the Gulf of Mexico, prices will go up.
Funds
Market makers like the big investment banks can push prices up or down by speculating with significant amounts of money. Only 3% of the world’s oil consumption is traded at the New York Mercantile Exchange (NYMEX). This means that by using leverage you can control the whole market with only $4 billion. Imagine how much of that is controlled by the big boys like Goldman Sachs…
Locals
Individual traders are not very likely to influence market prices. Only the very well known traders like Warren Buffet can move markets by their public statements. If Buffet says economic growth is on it’s way, markets might be affected and oil prices can (temporarily) go up.
