Finance, Financial Markets

Rapid Changes in Oil Prices Spur Spike in Oil Futures Derivatives

A spike in oil future derivatives is likely to transpire now that oil-producing countries finally took action to arrest the continuing decline in oil prices.

What Caused the Collapse in Global Oil Prices?

The collapse of global oil prices went as low as $2. per barrel, only to slump further at 25 cents per barrel. Price drops were driven by the excessive supply of oil amidst the coronavirus crisis. Inasmuch as the economies of countries across the globe halted, the demand for oil rapidly vanished and caused a reverse trend on how oil prices go in the global oil markets.

As prices continued to drop, member countries of the Organization of Petroleum Exporting Countries (OPEC) finally came to an agreement to cut their supply of oil. That way, a semblance of balance will be achieved if less will be available until such time that supply, becomes more or less, proportionate to current demand.

A more significant step that was taken, was the suspension of oil production. Since nearly all storage tanks remain full, none will be available if oil fields and drilling sites continue to pump out oil. Currently, the price of oil is coursing at an upward trend, as the demand for oil and petrol products is likewise increasing in countries that are gradually reopening their economies.

Still, rapid changes in oil price are  taking place, as countries in Asia where Russia’s oil are being delivered, are currently experiencing a second wave of the COVID-19 pandemic. In the U.S., several states are also experiencing a second wave; although it is widely suspected that the additional cases are mere extensions of the first wave.

Nonetheless, stock market investors have little confidence in buying shares of oil companies despite their ridiculously low prices. The general consensus is that it will take time before oil companies can recover from the losses caused by the oil-price collapse. That being the case, not a few, but many financial traders are turning their attention to oil futures and their related derivatives.

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Newbies are Advised to Practice First Before Participating in Derivatives for Oil Futures

Although derivatives for oil futures may have the appeal of being a straightforward yet lucrative transaction, it would be best for newbies not to quickly jump in. The matter of making decisions on whether to agree (Yes) or disagree (No) to a proposition requires careful thinking and assessments of global conditions. A wrong decision over a proposition could spell substantial losses that one might find hard to recover.

Newbies should first take time to practice by using a demo or practice trading platform like the one that they will find at https://ipoption.com/

The platform is offered free of charge by leading CFD broker IQ Option Europe Limited, which comes with a 10,000 demo money value. This broker is licensed and regulated by the Cyprus Securities and Exchange Commission, which requires licensed brokers to offer a demo trading platform that has the same and exact features as the platform used for real money. The only difference is that the demo software runs only on demo-money.

Another great thing about using the IQ Option demo trading platform is that for a minimum deposit of $10, new members can practice all they want and for as along as they want.

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economy, Main Blogs

British Economy Slumps But The Worst Is Yet To Come

Britain’s economy contracted significantly in March. According to Commerzbank expert Peter Dixon, this is just the beginning. Because in addition to a much more severe slump in GDP, the country is heading for steep deficits.

No other country in Europe is grappling with the coronavirus pandemic like the UK – around 231,000 cases, more than 33,000 deaths, more than any other European country. The consequences for the economy are likely to be dramatic because of the severity of the outbreak, the Bank of England recently warned.

Bank of England predicts the worst slump in 300 years

The central bank anticipates a 14 percent decline in the gross domestic product (GDP) for the year as a whole – the hardest slump in over 300 years. The steep minus is the result of an unprecedented slump of 25 percent in the second quarter, after a decrease of “only” three percent in the first quarter, the bank predicts.

Commerzbank economist expects considerable losses

The GDP decline in March recently gave the first taste of this. Data released on Wednesday showed that economic output in March fell 5.8 percent from the previous month. In the entire first quarter, this was minus 2.2 percent.

“The worst is probably still ahead of us,” warned the expert for Great Britain, Ireland, and the British Federal Reserve. “Since the lockdown did not begin until late March, its full economic impact will not be felt until April,” said Dixon.

According to Dixon, economic activity at the end of March should have been about 25 percent lower than in February. Had the economy not recovered since then, there would have been a further 23 percent decline in the second quarter. However, Dixon expects the minus to be somewhat smaller due to the easing.

The economist’s expectations show that the Bank of England’s horror forecast has not exaggerated, especially since the central bank’s assumption was that the lockdown would remain so strict until June.

Britain pays € 17 billion a month to maintain jobs

In addition to the decline in GDP, Dixon anticipates that the pandemic will drive up British unemployment and will ultimately cause a significantly higher budget deficit – for example, through the so-called “Coronavirus Job Retention Scheme” (CJRS), which translates as “Coronavirus workplace”. Conservation System ”means.

This program will be extended beyond the second quarter to October, Dixon said. “To reduce costs, the workers on leave will be able to work part-time from August, with employers having to pay part of their salaries,” said the economist. After all, that helps to push down the cost of the CJRS, which currently costs the UK £ 15 billion a month.

Nonetheless, this cannot stop the decline in jobs. According to Dixon, the country’s unemployment rate is expected to rise by a whopping three percentage points from 3.5 percent in March to 6.5 percent in April. For comparison: In April the unemployment rate in Germany was 5.8 percent.

Public debt should rise by a quarter

While the public is eyeing for quick economic recovery, the consequence may lead many small and medium businesses to take out loans in private institutions like Loose Lending (https://looselending.com/).  For these reasons, Dixon expects significant deficits in the UK budget: “In our baseline scenario, we currently expect the government deficit to increase to around £ 250 billion (12.6 percent of GDP) in the fiscal year 2020-21.” The Treasury The country even reports a loss of 337 billion (16 percent of GDP), according to media reports.

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