Oil is a Supply and Demand commodity. There are a certain amount of countries in the world who have oil in their territory and exploit it. Some countries like America have a lot of it, (fortunately) while some other countries just barely have some or none. There is a constant demand for oil worldwide. Every country in the world demands for products made from oil and also demands for energy. Electricity is made mainly by burning fossil fuels, and anything that runs on Diesel, Jet-fuel, Gasoline, etc will need Oil to keep running. So, either electric or not, you need Oil to keep your economy running, and that oil is produced by these countries. Energy produced by other sources other than electric is not significant compared to Oil.

I am trying to be the most concise and easy-to-read as possible not to bore you with political and economical data for Oil. I want you to understand that Oil price is based on two things: Supply/Demand and Market Certainty. There are some countries that are part of the OPEC (Organization of the Petroleum Exporting Countries) which are 15 of them and they take decisions on the Supply of Oil worldwide. That doesn't mean those 15 countries produce all the Oil in the World, but they get together and take decisions on how much Supply they want to put out in the market, and dictate pricing.

Now that the Oil price went down from $60 to almost $20 per barrel, it was a combination of two factors: Saudi Arabia and Russia not getting into an agreement on how much production cut they will perform to help lower Supply and keep pricing in place, and the disease that is affecting the economy of the world and everyone is consuming much less Oil. Are people flying? Are people driving? Is there as much activity where Oil is consumed? No, and this lowers Demand. More Supply and less Demand causes prices to fall. Market Uncertainty causes people to short Oil Futures and that also affects pricing downwards. 

You should understand how Oil works. If we look at Oil price for the last 70 years, we have different market cycles where Oil has been up in the $40 range, and then dropping, until the biggest drop in 2014 to 2015 from $120 to $35's. These are called Market Crashes. They happen frequently and almost every 5 to 10 years. Now we are in one of them, and probably the deepest fall since 70 years! Oil went from $61 in December 2019 to $21 in March 2020. This was mainly caused by the Saudi-Russia disagreement and the disease we already now. If it weren't for the disease, the oil would have probably dropped to the low 40's only. 

There hasn't been any other time when Oil has been this cheap in the last 22 years. (since Nov 1998) When the president announces that they have found a vaccine in their labs and are ready to eliminate the virus completely, the economy will resurge again. When will this happen? I really do not have the answer for that, but you can hear it in the news every hour. 

You should start looking for a software to trade Oil with. You don't need a broker that charges hefty commissions. I use Tradestation. You can create a free account on www.tradestation.com and then play with the simulator. The simulator will give you $1,000,000 of free (non-existing) money that you can use to put trades and play with the market. It is not easy to use, so I suggest you play a little bit with the simulator before you actually use your own money. Once you are ready to trade, you will need to buy the real market data for Futures (a rep can guide you with that) that is not expensive, and start trading!

If you buy Oil Futures today at $25/barrel and sell them when they are back in $50/barrel you will pretty much make 100% ROI on your money! Be careful though, you need to guarantee that the trade keeps open for 30 days at least to make this happen. You will also place a Stop under the current price in case the oil price keeps going down. You don't want to lose so much money if the oil price suddenly goes to $15! It is a risk you can take, it is up to you to take it or not. I suggest you open an account and play with the simulator, until you feel confident you can place a trade in seconds. When you see the news and they find a cure for the disease, then you go ahead and invest in Oil Futures!

This applies for everything else within the market and Wall Street. If they find a cure for the disease, the S&P 500, Nasdaq and Dow will go up as well. You can buy stocks from those as well at the same time you trade Oil! Also, some currencies go down as Oil goes up such as the Mexican Peso/USD. You can also trade Forex and make money at the same time that everything starts getting better. The Mexican Peso used to trade for $18.5 per dollar in December and is now trading at $24 per dollar! Forex requires you have a little more understanding about the software as well. You can use an experienced Tradestation professional to place these trades if you are not comfortable playing with the software. 

I am currently saving my money to invest in 4 more rental properties (Single Family) to add to my portfolio. I feel there is a lot of instability in the market today and we don't know if this virus will last for 6 more months and dissolve Wall Street even worse. Remember 2008 had a market of 6,500 points! We are only at 20,000 points today! It can go way down! That is why I am telling you to understand your software and your options before taking a rushed decision. I want you to be able to act fast when you need to. 

Be careful with your money. This is the best time for you to invest in Oil Futures if you were thinking of doing so. I don't think it will go any lower than $20 per barrel. I don't think the same for the S&P 500, because there is still a long way to go down if needed! Keep saving, at least 20% of your income, and put it aside safely in a high-yield savings account or money market account/CD (FDIC Insured) where it is safe. Start talking to brokers and start playing around with software to trade (safely) so you can act fast when they find a cure for the disease. If you can ride the roller coaster up from whatever it is to 30,000 points again and Oil from whatever it is to $60/barrel again you can make a hell lot of money! 

Hope you enjoyed this post, and let me know in the comments if you are taking action about this! Download the free spreadsheet becoming a member where you can track your expenses and become an expert budgeting your money. Have a great day!