What are Oil CFDs and How Do You Trade Them? IG International

When you trade a futures contract, you must either buy or sell—”call” or ”put”—the commodity by the expiration date at the stated price. If you hold a call, the only way to avoid actually having to take physical delivery of 1,000 barrels of crude oil is to offset the trade before the expiration. Trading in crude oil and energy markets requires exceptional skill sets to build consistent profits.

US traders welcome at these brokers:

One recent event that caused the price of crude oil to skyrocket was Russia’s invasion of Ukraine. In February 2022, crude oil began trading above $100 per barrel, its highest price since 2014. The U.S. Oil Fund offers the most popular way to play crude oil through equities, posting average daily volume of about 2-million shares. This security tracks WTI futures but is vulnerable to contango, due to discrepancies between front month and longer-dated contracts that reduce the size of price extensions. In addition, not all energy-focused financial instruments are created equally, with a subset of these securities more likely to produce positive results. When acquiring our derivative products you have no entitlement, right or obligation to the underlying financial asset.

• The EPA forced the changes in the 2010s due to new federal air rules for the power plants and a settlement with the plant, according to the plant’s then-owner.
• The price of the spot contract reflects the current market price for oil, whereas the futures price reflects the price that buyers are willing to pay for oil on a delivery date set at some point in the future.
• Crude oil is one of the better commodities to trade on a futures contract, because the market is incredibly active, and it is well known to traders around the world.

How do I start trading oil CFDs?

We want to clarify that IG International does not have an official Line account at this time. Therefore, any accounts claiming to represent IG International on Line are unauthorized and should be considered as fake. Please ensure you understand how this product works and whether you can afford to take the high risk of losing money. Crude oil prices can vary depending on their origin and current supply and demand, and oil trading prices fluctuate throughout periods of volatility. The two most commonly traded benchmarks of crude oil are Brent and West Texas Intermediate (WTI), both of which are available on our online trading platform.

Day Trading Crude Oil Futures

Many of the same principles that apply to stock index futures also apply to crude oil futures. When you trade the oil markets you have a choice to either trade CFDs on the oil spot price, futures or options. When trading CFDs on the oil spot market you would need to pay for overnight https://investmentsanalysis.info/ funding. This can be avoided by opening longer-term positions on the underlying oil market by trading futures or options. According to a report by the EIA, OPEC+ production cuts will reduce global oil inventories over the next three quarters and push oil prices higher.

Go long if you believe the oil market price will increase and go short if you think it’ll fall. Let’s use the example that Brent crude oil is priced at £50 per barrel; this means that one lot is worth £5000. In order to calculate your possible profits or losses, you need to assess the difference between the opening and closing price of the position. We list regulated brokers and platforms that are available in your country, discuss the reasons why people trade in oil, and provide some tips for understanding the oil market.

Three of them are owned by Rain CII, a Connecticut-based company that is part of an Indian global concern. The other plant, in Baton Rouge, is Oxbow Calcining, owned by billionaire oil and gas industrialist and conservative activist William Koch. Oil prices slumped to their lowest levels since February amid last week’s global market turmoil. Dip-buying, driven by increasing demand, may have supported the price rebound. US stockpiles have been decreasing since mid-June, coinciding with the summer travel season in the Northern Hemisphere.

During the winter, a higher demand for heating oil causes prices to move higher. The levels of crude oil stockpiles and inventories, particularly in major oil-consuming nations such as the United States, can impact prices. When inventories are high or increasing, it suggests a potential oversupply situation, which can put downward pressure on prices.

Oil prices fluctuate on the faintest whisper of news regarding pricing, which makes it a favorite of swing and day traders who are looking for an edge. This volatile environment can provide some solid trading opportunities, whether your focus is on day trading futures or longer-term trading. It can also cause heavy Crude oil cfd losses if you are on the wrong side of a price movement. Brent Crude Oil is the leading benchmark for crude oil trading, used to define the price for two-thirds of global oil purchases. In recent years, Brent has offered a good indication of worldwide oil prices and is traded on the Intercontinental Exchange (ICE).

Imports from Canada to the United States grew by an average of 4% in every year from 2013 to 2023. Canada’s crude oil exports to the United States amounted to 24% of U.S. refinery throughput in 2023, an increase from 17% in 2013. Crude oil imports from Canada have become increasingly important to U.S. oil refineries, now making up most U.S. imports. U.S. oil refining capacity stood at 18.4 million barrels per day (b/d) as of January 1, 2024. In 2023, 60% of U.S. crude oil imports originated in Canada, up from 33% in 2013.

Canada’s crude oil production has outpaced the growth in pipeline capacity to markets outside of Canada. As a result, the price of WCS has remained at a significant discount to WTI. In addition, Western Canada has had difficulties accessing global markets due to limited pipeline infrastructure connecting the region to coastal ports.

As the most commonly traded benchmarks of crude oil, most oil CFDs are concerned with WTI or Brent Crude Oil. The basis, or differences, between oil futures contracts and the spot (cash) market can be indicative of the near-term expectations of oil supply and demand. When futures prices are trading higher than the spot (known as contango), it suggests that traders are willing to pay a premium for oil to be delivered at a future date and that expectations are bullish. When futures are trading below the spot (known as backwardation), it can be a bearish signal. It’s important to note that a complex interplay of these factors influences crude oil prices, and their impact can vary over time. Therefore, traders and investors should closely monitor these drivers, stay informed about market developments, and adjust their strategies to navigate the dynamic crude oil market effectively.