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How the Price of Crude Oil Affects the Stock Market

What are the effects of low oil prices on different industries?

22. JANUARY 2016 - At the moment of writing this article, the price for a barrel of crude oil has reached its lowest point in 13 years at only $27 for a barrel. Traditionally, the price of crude oil has been one of the main factors governing global economy, also affecting the stock market in more ways than most people can imagine. Today, we will try and give something of an analysis of what these historically low crude prices mean for the stock market and the traders.

Oil Companies Stocks are Losing Value

Perhaps the most obvious and expected effects of the low crude oil prices is that the majority of world's oil companies are seeing their stocks depreciate rapidly. This is perfectly understandable as their profits are dropping and as they are laying off more and more people.

An offshore oil platform on the sea
As the price of crude oil falls to near record levels, this has affected not only the value of oil companies,
but also other related industries, investments and the whole economy.

Automotive Industry Stocks are Rising

On the other hand, you have different automotive companies whose stocks are getting more and more valuable as people are purchasing cars stimulated by the dropping gas prices. This is also true for most other transportation companies, such as airlines which can afford to offer discounts and thus attract more fliers, resulting in increased profits overall. Smaller companies associated with the transportation industry are perhaps seeing the biggest rise in stock value as they are most directly affected by the dropping oil prices.

Entire Stock Exchanges are Shaken to the Core

There are quite a few stock exchanges that are more dependent on the prices of crude oil. One of the most obvious examples of this is the Moscow Exchange which has traditionally been affected by the price of fossil fuels and other basic commodities. For instance, the Russian ruble's value has dropped to record lows. Middle Eastern exchanges are also rocked by the low oil prices.

Real Estate Markets are Greatly Affected

In addition to the more directly affected industries, some additional industries also suffer due to the drop in oil prices. For instance, the real estate markets in a number of U.S. states such as Alaska, North Dakota and Wyoming are facing a crisis as people are losing jobs and the demand for residential and commercial properties is on the decline. Because of this, various construction and associated companies are experiencing significant drops in stock value.

Forex and Binary Option Markets are also Affected

Traditional stock market is not the only one affected greatly by the low oil prices. For example, the forex market is more volatile than ever before with certain oil-dependent currencies rapidly losing in value. These include the aforementioned rubles, Canadian dollar and Venezuelan bolivar, among others. According to the experts from 24Option, the binary option market is also experiencing increased action as the prices of commodities become more volatile than in a long time.

How Should Traders Behave?

The most important thing for stock market traders to do is to keep their eye on the prices of crude oil and to read analyses by different experts who know exactly how these low prices affect the different industries and stocks. This may be a great time to make some big moves, but it is also very important for traders to be careful as these are very eventful times that can move in all directions.

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