Starting A Crude Oil Trading Business In Nigeria
Crude Oil Trading:Selling crude oil is an excellent place to start if you want to make money in Nigeria. You’ll learn how to buy and sell crude oil, how to create a crude oil brokerage, how to profit from trading crude oil, and more in this post.
You don’t have to be as wealthy as Femi Otedola or Aliko Dangote to begin trading crude oil in Nigeria. At the end of the post, I’ll also show you how to start trading crude oil for free. Trading crude oil is extremely profitable and makes it simpler to make money.
The Crude Oil Concept
You need to comprehend certain fundamental ideas like what crude oil is, different types of crude oil, crude oil markets, importing and exporting crude oil, trading crude oil, and profits before we can get started on launching a crude oil brokerage.
Describe crude oil.
Crude oil, often known as petroleum and occasionally liquid gold, is an underground liquid mineral comprised of hydrocarbons, organic molecules, and trace amounts of metal. Still today, a lot of people mistake crude oil for gasoline.
Crude is the finished product, whereas gasoline is the basic material. Petroleum products like gasoline, engine oil, kerosene, heating oil, diesel, jet fuel, and other petrochemicals are made from refined crude oil. The top three oil producers in the world as of 2018 are Saudi Arabia, Russia, and the United States.
Crude Oil Types
There are various grades of crude. Crude oil comes in a variety of forms depending on where it is generated, and the price reflects the quality. The consistency and density of crude oil are different. These elements are influenced by the location and methods of crude oil extraction.
Sulfur is the most crucial component of crude oil. Crude oil can be described as sweet or sour depending on the density of the sulfur, which ranges from heavy (greater density) to light (lower density).
The lightest and sweetest crude oils tend to be the most expensive; these are the actual liquid gold and are recognized as superior in the market. Because they are simple to process in refineries and consume less energy, they are not just pricey but also in high demand.
When refined or processed, two barrels of unleaded gas and one barrel of heating oil are created from around three barrels of crude oil. Over 150 distinct grades of crude oil are traded on a global market.
Sweet crude oil is the most popular grade of crude oil traded on the global market.
- Light Sweet Crude Oil
Light Sweet Crude Oil is traded on the New York Mercantile Exchange (NYMEX). Another popular grade of oil is Brent Blend Crude, which is traded in London. Brent Blend Crude makes up about two-thirds of all traded oil.
Sweet crude oil is also easy and less expensive to refine, distill and produce other petroleum & energy products like gasoline, kerosene & diesel.
- Brent Crude
Brent Crude is another popular light and sweet grade of crude oil that comes from fields & well in the North Sea. Brent oil is easy to transport and easy to distill into diesel, gasoline and middle distillates. Brent is refined in Northwest Europe.
Brent oil is the most popular crude oil benchmark, mined from about 15 different fields and combined. About two-thirds of all crude is Brent which is over 60% of crude contracts in the international markets referenced to it. Brent is the primary oil type in Africa and Europe. It is traded on the ICE EUROPE exchange.
- West Texas Intermediate (WTI)
West Texas Intermediate (WTI) also called US Crude is a grade of crude oil mined from oil wells in the United States and transported by pipeline to Oklahoma by. West Texas Intermediate (WTI) is expensive to ship around the globe.
WTI is believed to be a higher quality crude oil and it is usually more expensive than the Brent oil. West Texas Intermediate (WTI) is another grade of petroleum from U.S. wells. The product is also light, sweet and easy to distill into gasoline
WTI is the benchmark of all US oil and trades under the CL ticker on the Chicago Merchantile Exchange (CME) and the New York Mercantile Exchange (NYMEX).
Central Asian crude
Another form of crude oil is from the Middle East, sometimes referred to as Dubai oil and Oman oil. It is heavier, sourer, and has a higher sulfur density. The Dubai Mercantile Exchange is where this grade of oil is exchanged.
The Best Way to Trade Crude Oil
Crude oil is a particularly desirable asset for customers, traders, and investors due to its volatility. Simply buying and selling in the futures and options markets, where you purchase lower and resell with a profit, is all it takes to make money trading crude oil.
Basically, you enter call contracts for higher prices and put options for fluctuating oil prices. This is carried out if you are trading oil on a global market either alone or via a broker.
- You can also trade crude oil by buying/selling stocks of companies in the oil industry i.e Shell, Chevron, NNPC, Standard Oil, Mobil, Total, Oando, etc. It doesn’t matter if the stock of the company you’re buying/selling is involved in oil exploration, mining, refining, trading or marketing.
- You can also trade crude oil as a CFD. Trading Oil as a CFD is the best way to start trading crude oil. This allows you to speculate the price of crude oil without having to buy any contract. Trading Oil as a CFD allows you to use diverse trading options, liquidity, leveraged trading, and lower associated trading costs. This adds to your advantage and makes making money super easy.
- You can also trade crude oil as a Brokerage. Trading oil as a brokerage is one of the best ways to make money from trading oil. Crude oil brokerage simply involves sourcing buyers, investors, and end-users of crude oil and other petroleum products for producers.
Unlike most financial assets that you can just easily invest in, trading crude oil requires in-depth knowledge of the trading space. If you want to make a profit from trading crude oil you need a business plan that gives you the upper hand even in international markets.
- Get a Broker
Before you start trading crude oil, you need a good broker, especially when trading in a global market. They have all the tools that you need to get started and even allows you to sign up and start trading for free.
Most of the brokers out there then to scam investors of their funds and assets, so you have to be careful when selecting your broker. Here are what you should consider when picking a broker.
Safe & Trustworthy
Your preferred broker should be a regulated and registered broker that secures the funds and information of all clients and investors. While offering ethical, quality, legal trading services according to regulation given by regulators.
Ensure that your broker is trustworthy. Check to see if they use unethical methods like slowing trades, giving false charts, trading signals, exchange rate or statistics. If you don’t check their reviews and ratings you may just fall victim to a scam.
- Leverage Trading
Your broker should offer a good leverage option that is tailors to benefit you first.
- Customer Support
A good broker should have multilingual customer support that is available 24/7. This allows you to get help whenever you prefer to trade noon or night. It should also have a branch office in your country [Not compulsory though] in case you have other complaints.
Excellent Trading Platform and Tools
Good trading platforms, tools, and most importantly quick servers, are characteristics of a good broker. Additionally, your broker has to have a blog where they provide educational materials like ebooks, videos, webinars, seminars, online classes, and even a trading academy.
Additionally, your broker need to grant you access to simple trading platforms like Metatrader 4 and Metatrader 5. They have to offer newsletters that inform you of developments and opportunities in the international market. This proves how much your broker cares for you.
Numerous payment and deposit options for assets
Your broker needs to offer safe banking solutions for wire transfers, credit card deposits, PayPal, Bitcoin, WebMoney, FasaPay, Dinpay, and Boleto withdrawals.
Additionally, you should be able to trade stocks, bonds, commodities, indices, FX pairings, cryptocurrencies, and ETFs with your broker. With API Trading, Vanilla Option, ZuluTrade, and DupliTrade, it should also provide you with automatic trading, web trading, and mobile trading choices.
Identifying Markets
Finding a good market is one surefire approach to succeed in the oil trading business. In addition to trading oil in Nigeria, some dealers also do it in the United States, China, Russia, South Africa, and even Israel. But you should be aware that the price of oil is greatly influenced by news and by supply and demand.
Every Wednesday, the EIA [US Energy Information Administration] must be consulted for news and oil reports. They keep tabs on the elements that affect the oil supply and demand. This covers news updates on regional oil booms, oil exploration, changes at oil companies, and OPEC meetings.
Demand and supply for crude oil are influenced by a number of factors.
There are numerous factors that could influence the price of crude oil. But certain elements are more important than others. These are the three main variables that affect oil prices.
Season
Celebrations, the season, and other events have a big impact on how much crude oil and other petroleum products are in demand. There is typically a lot of travel over the summer, at Christmas, Thanksgiving, and Easter. As a result, there is a rise in demand for crude oil, which raises the price.
OPEC Cap
The Organization of Petroleum Exporting Countries (OPEC) is a grouping of nations that export petroleum. Crude oil supply, demand, and price are governed and decided by OPEC. Additionally, OPEC sets quotas that members must meet.
Petroleum Product Demand
The price of crude oil is rising along with the demand for petroleum-based goods. For instance, a cold season like harmattan or winter increases demand for fuel made from crude oil, such as kerosene, diesel, unleaded gas, heating oil, and gasoline. The supply will be decided by this, and increased crude oil prices will result.
Investors and traders in crude oil should keep an eye on the US dollar’s value. Because the price of oil tends to decline when the US dollar’s worth increases. However, the price of crude oil tends to increase when the US dollar’s value declines.
Additionally, oil is traded alongside the US dollar (USD) on global markets. You should keep a tight eye on the crowd and your market. A skilled trader and investor in crude oil should be able to control the energy futures market and scale both upward and downward trends.
Get A Reliable Trading Strategy
Trading crude oil is a unique enterprise with significant risk and potential return. If traders and investors are to consistently make money in the crude oil and energy markets, they must have remarkable skills in selling and bidding.
Investors and dealers in crude oil need to understand the following information: “What Moves The Commodity?” “The Commodity’s Behaviour In A Particular Market?” What Has Crude Oil’s Long-Term Price History Been In Your Market? How Do Prices And Physical Differences Among Grades Compare In Your Market?
The cost of crude oil varies greatly and abruptly. A sound trading strategy is essential to preventing or controlling losses. You need a solid strategy that will enable you to pinpoint the best price levels, price goals, and entry points into trades. You can see attractive risk/reward possibilities with the help of a solid trading strategy and technical analysis.
It’s quite simple to create a strong business plan once you’ve addressed all 4 questions. The views of supply and demand influence the price of crude oil. The output on a global scale affects demand and supply.
Due to an excess of supply and a decline in demand, dealers and investors in oil liquidate their positions at a loss. While increasing demand and stable output encourage traders and investors to bid up the price of crude oil.
Make money
Profits are the driving force behind the entire crude oil trade. You cannot earn money if you cannot turn a profit. One of the finest commodities to trade is crude oil. This is one of the sites where investors from all over the world make money because the market is so large and active. This is because a significant source of energy is crude oil.
Profits from changes in oil prices are generated by dealers of crude oil. When the price is low, you buy and sell for a profit when the price is higher. Through an internet broker, trading crude oil is simple. Make sure to keep up with global news and trends because political and economic developments have a big impact on crude oil prices.
When trading, you need also make sure that your stop orders are effective. When it appears that the market is moving sideways, this enables you to manage risks and losses. So as you can see, trading oil is really simple.
