Essentially, a CFD is an agreement between a trader and a broker to exchange the difference in the asset’s price from when the contract is opened to when it is closed. In contrast, the futures price is the price of oil at a fixed point in the future, such as 1, 3, or 6 months ahead. Spot and futures prices differ due to factors such as the cost of carry (including storage and transportation costs) and the forward supply and demand curve for oil.
- For traders who find scalp trading too demanding, day trading or swing trading may be better alternatives.
- Oil trading can be profitable due to the highly active market and the numerous external factors affecting oil prices, creating frequent trading opportunities.
- Traders only deal with price movements, which makes trading oil CFDs more convenient and accessible than owning physical oil.
- This makes it accessible for anyone to trade oil prices without worrying about storage, shipment, and arranging trades with interested parties – everything is just a click away.
What Affects the Price of Oil?
On the other hand, crude oil futures come with expiration dates, requiring traders to either settle the contract or roll it over before the expiry. Futures contracts are standardised, usually representing 1,000 barrels per contract, making them larger and less flexible compared to CFDs. Futures are commonly used for hedging, as they provide businesses with a tool to protect against oil price fluctuations. While physical delivery is possible if the contract isn’t closed before expiration, futures offer lower leverage and are traded only during specific exchange hours. Oil CFD trading offers an exciting way to profit from the fluctuations in the oil market without the need to buy or sell physical oil. However, like all forms of trading, it carries risks that traders must manage carefully.
These charges typically do not apply to trades opened and closed within the same business day. It is also important to note that margin or leverage rates can vary between different products and regulatory jurisdictions. Oil CFDs are contracts used to exchange the difference in value of the oil price between the point at which the contract is opened to when it’s closed. Trading oil CFDs will enable you to speculate on both the rise and fall of the underlying asset’s price movement without taking ownership of it. Crude oil markets are open 23 hours, 6 days a week, which means traders can pick and choose the best or most convenient time to trade USOIL (WTI) and UKOIL (Brent) prices. However, there are also typical optimal timings to intraday trade Crude Oil.
The maintenance margin is the small percentage of your trade’s value that you need to have in your account to keep the trade open. Given that OPEC+’s meetings are scheduled in advance, oil traders are always looking forward to these meetings to anticipate the price action. Entering a CFD trade means you’re buying or selling barrels of oil with each CFD typically representing 1 barrel (159 litres, 35 imperial gallons, or 42 US gallons). Whilst it is not subject to any prohibition on dealing ahead of the dissemination of investment research we will not seek to take any advantage before providing it to our clients.
Other methods of oil trading
You’ll fill in an online form and once the application is complete, you’ll receive a notification when it’s accepted. Note that there’s no obligation to fund your account once opened, and you can wait until you’re ready to place your first trade. If you need to build more confidence in your trading skills, open a free demo account with us.
- There are several differences between WTI and Brent crude oil that are important to consider when choosing your commodity to trade.
- The pursuit of oil has historically led to conflicts, and much of the world’s oil is still produced in politically sensitive areas.
- Futures trading is a contractual agreement between two parties to buy and sell an asset at a fixed price in the future.
- In 2022, global oil production reached 93.90 million barrels per day, according to Statista.
- These charges typically do not apply to trades opened and closed within the same business day.
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Oil options give you the right to buy or sell the market before the commodity reaches its expiry on a specific date in the future. With options, you won’t be obligated to buy or sell the oil market, so if it moves against you, you’d decide to pay only the initial margin you used to open the position. In CFD trading, the standard lot size for crude oil can vary depending on the broker. Typically, a standard lot represents 1,000 barrels of crude oil, but many brokers also offer mini-lots (100 barrels) and micro-lots (10 barrels) to provide flexibility for smaller positions. However, the increased risk from leverage means that proper risk management is crucial when trading CFDs, and make sure your trades don’t fall below their maintenance margin.
However, the same factors can lead to significant losses if a trader lacks discipline, ignores money management and risk rules, or trades emotionally. Oil’s sensitivity to geopolitical and macroeconomic events means it is relatively easy to incorporate macroeconomic analysis into an oil trading strategy. As with all commodities, oil is mostly priced and traded in US dollars, making it sensitive to changes in the dollar’s value.
Leverage and Margin in Oil CFD Trading
OPEC, or the Organisation of Petroleum Exporting Countries, is effectively the international trade body for many oil and gas producing nations. This information is provided for informative purposes only and should not be construed to be investment advice. If you’d rather not trade with leverage, you would opt to buy and own oil stocks or exchange-traded funds through share dealing. Since share dealing doesn’t use leverage, you would be liable to pay the full value of your position upfront. For this strategy to work, traders can set up the UKOIL-USOIL chart on TradingView, which allows us to plot significant spread levels on a chart. Although Brent Crude and WTI are slightly different in pricing, they generally tend to move in tandem with one another.
Oil trading involves the exchange of crude oil, one of the world’s most essential and highly valued commodities. Crude oil and its refined products serve as the backbone of the global economy, acting as both a primary energy source and a critical raw material. Consumed continuously across the globe, oil has played a pivotal role in shaping the modern world. Oil CFDs allow you to trade on the price difference of oil from when you open to close the contract. This means you can speculate on both upward and downward movements in oil prices without owning the asset itself. Let’s use the example that Brent crude oil is priced at £50 per barrel; this means that one lot is worth £5000.
CFDs are free from stamp duty, but you may pay capital gains on your profits.3 Note that when hedging you’ll incur costs, be sure to factor these into your hedge calculations and projections. In this context, the WTI Crude vs Brent Spread refers to the price difference between USOIL and UKOIL. Usually, the Brent Crude Oil (UKOIL) price would lead USOIL by a few dollars. However, when this spread difference is drastically widened or narrowed, a price reversal is expected on either UKOIL or USOIL. What we found was that Mondays are less optimal for intraday trading, with all the other days being somewhat close in their average volatility. The ATR should also be moving up, to help us confirm the strength of the trend.
All oil CFDs are traded using leverage
CFD trading is one way to get exposure to oil using leverage and you won’t be taking ownership of the underlying oil markets. Long-term traders may use daily and weekly charts, while short-term traders might prefer 15-minute and 60-minute charts to make trading decisions. CFDs are ideal for traders looking for flexibility, higher leverage, and no physical crude oil cfd delivery concerns. Futures, however, are better suited for long-term traders or businesses needing standardised contracts and hedging options, with the possibility of physical settlement. For traders, this means that Oil CFDs can be a fantastic asset to trade on Saturdays, a day which typically isn’t traded because the Stock Exchange and Forex markets are closed. CFD Oil Trading offers unparalleled flexibility compared to physical oil trading, oil futures and options trading, and is accessible to anyone.
Oil prices can be highly volatile, influenced by a range of factors, including geopolitical tensions, natural disasters, and economic data. This volatility can lead to rapid price changes, which may result in large losses for traders who are not prepared. The Organization of the Petroleum Exporting Countries (OPEC) plays a significant role in controlling global oil supply. OPEC often meets to discuss and agree on production quotas for member countries. Any changes in OPEC’s production policies can have a profound impact on oil prices.
Events that threaten or hinder the production or transportation of crude oil and its refined products can send oil prices higher very quickly. Conversely, geopolitical events that increase crude production or ease transportation bottlenecks, such as those in the Straits of Hormuz or the Suez Canal, can drive oil prices lower. Oil CFDs are popular among individuals who want to trade oil markets without having to buy and own physical barrels of the commodity.
Oil CFDs (Contracts for Difference) are derivative contracts that allow traders to exchange the difference in the value of crude oil prices between the opening and closing of the contract. Instead of owning the physical commodity, oil CFDs enable traders to speculate on the direction of oil prices, potentially profiting from the price difference. Instead of the options outlined above, many traders prefer to use CFDs to trade oil. 80% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. This means you can go long (buy) if you think the price will rise, or go short (sell) if you think the price will fall.
Economic downturns generally reduce demand, pushing prices lower, while recovery phases increase consumption, leading to price increases. Copyright © 2025 FactSet Research Systems Inc.Copyright © 2025, American Bankers Association. SEC fillings and other documents provided by Quartr.© 2025 TradingView, Inc. For privacy and data protection related complaints please contact us at Please read our PRIVACY POLICY STATEMENT for more information on handling of personal data.
Additionally, we will be using the ATR to set a realistic stop loss and take profit area to improve this strategy’s consistency. This strategy utilises two Exponential Moving Averages (EMAs) and the Average True Range (ATR) indicator to take advantage of smaller trending moves on the 5-minute timeframe. The domain blackbull.com is registered under our company, Black Bull Global Limited.
This article provides a comprehensive guide to understanding oil CFDs, including their mechanics, benefits, risks, and strategies for trading. Contracts for difference can further be used to speculate on price movements in the oil market through a commodity futures contract. Futures trading is a contractual agreement between two parties to buy and sell an asset at a fixed price in the future. Whereas CFD trading is an over-the-counter product, futures are generally traded on a local exchange. Therefore, buying and selling oil futures is not specifically carried out through a CFD, although it gives the investor the chance to trade price movements of said future contracts. Crude oil prices can vary depending on their origin and current supply and demand, and oil trading prices fluctuate throughout periods of volatility.
