The price of oil surged from $65.64 to $69.07 on Friday after OPEC members agreed to supply the markets an additional 700k barrels of oil a day.
The market had anticipated that the supply agreement would have been closer to 1 million extra barrels a day and that is why we saw the price surge.
When an actual market event widely differs from what was expected, this, is when we see big moves. This is the key principal of understanding news events and how to position yourself to profit from them.
Other factors impacting oil prices from a supply side are Venezuela and the current increase in shale production in the USA.
Politically, Venezuela is in bad shape. They are now producing less than half the oil that they were 12 months ago (1.36 million barrels to 600k a day). The situation there seems to be going from bad to worse.
In the USA, we have a much higher production from shale then we have ever seen, now at 5 million barrels a day, an increase of 20% from a year ago. This is currently acting as the counter measure for the Venezuela shortage.
Oil is an instrument that offers huge rewards. Making yourself aware of the real triggers behind the moves such as demand/supply, OPEC statements and the political situations in oil producing locations will better help you position yourself to make a profit.
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