Spotlight on Crude Oil CFDs

Though the Brent field itself is no longer active, the name has been retained, and crude oil extracted from other European oil fields now falls under this designation. Had the trader initiated a spread trade at this point with just one contract each of UKOIL and USOIL, they would have made a profit of $7.30, despite taking a loss on USOIL. For traders who find scalp trading too demanding, day trading or swing trading may be better alternatives. These approaches generate fewer trade signals but require less constant monitoring, and generally have larger swings per trade. Without leverage, the profit of this trade would be $50, five percent of $1,000 (your initial margin). During Q1 and Q2 2020, WTI (USOIL) prices fell by 99.99%, which was caused by a COVID-19 triggered recession.

While in a trade, if your account balance gets too low and your equity starts approaching the maintenance margin, you might receive a margin call. As a result, oil CFDs are a highly popular market traded across the globe, granting the market a large liquidity pool and ensuring that your trades get filled quickly. As the world’s largest oil importer, China’s economic activity can create strong upward pressure on oil prices when its economy grows. Seasonal factors like winter heating demand and summer travel also affect consumption. Changes in the dynamics of supply and demand can also cause oil prices to experience sharp movements. Oil prices are sensitive to global economics and geopolitics, acting as barometers for both.

This highlights that global recessions, economic booms, and unexpected events, such as the COVID-19 pandemic, can significantly influence oil demand and prices. Oil CFDs let traders speculate and trade WTI and Brent Crude Oil prices without directly owning any oil physically. Learn how you as a trader can take advantage of this, and trade oil with minimal capital. Natural disasters, such as hurricanes, can disrupt oil production and refining processes, especially in regions like the Gulf of Mexico. Weather-related events can also affect transportation and storage, influencing supply and, consequently, prices.

This is why using risk management tools like stop-loss orders is vital to avoid reaching this point. OPEC+ plays a significant role by cutting or increasing production to influence supply, with cuts usually pushing prices higher and increased output leading to lower prices. For example, on April 2nd, 2023, OPEC+ introduced a surprise cut of 1.16 million barrels in oil production.

• Unlike traditional oil trading, oil CFD trading typically has lower transaction costs.
• Consumed continuously across the globe, oil has played a pivotal role in shaping the modern world.
• Monitor the trade and exit when requiredYou can keep track of your positions and make exit decisions when the market is profitable.
• Rates, terms, products and services on third-party websites are subject to change without notice.

Strategies for Trading Oil CFDs

• For instance, in February to March 2022, when Russia attacked Ukraine, UKOIL reacted more swiftly to European geopolitical events.
• Oil CFDs let traders speculate and trade WTI and Brent Crude Oil prices without directly owning any oil physically.
• 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.
• However, the flooding led to the shutdown of key oil refineries, which led to a supply shock, disrupting the markets.
• In order to assess your profit or loss, you then multiply the difference by the size of the trade (£5 x 100).

One of the main benefits of trading oil CFDs is the ability to use leverage. Leverage allows traders to control a larger position than they could with their available capital, amplifying both potential profits and risks. CFDs are leveraged products, providing exposure to the full value of the oil market with a deposit known as margin. For example, with leverage, you could open a $1000 position by depositing just $100, representing a 10% margin. Crude oil holds the distinction of being the world’s foremost commodity due to its critical role in producing liquid fuels essential for transportation across water, land, and air.

This means that traders with knowledge in this field may find that their price movements are easier to predict. Read more about futures, also known as forward contracts​, which are very similar products that we offer our clients. When trading oil CFDs using leverage and you’d like to open a position, you’ll be expected to pay an initial deposit that’s a percentage of the full value of the underlying market.

Risk Management Strategies

We will look to essentially trade the EMA 20 as a dynamic support or resistance, as long as the long filter or short filter conditions are met. Now, instead of earning $50, your profit would translate to 5% of $20,000 (your position size), which equates to a profit of $1,000.

Leverage allows traders to increase their exposure to the oil market without needing the full amount of capital that the position would typically require. Oil and geopolitics are closely interwoven because many of the world’s oil-producing economies are also political hot spots. Additionally, the biggest consumers of oil are among the most powerful nations.

How Do You Trade CFDs on Oil with Dukascopy?

It also explores the differing views within the Fed regarding the need for further monetary easing. Remember not to solely rely on third-party generated chart patterns on our platform to make your trading decisions, conduct your own due diligence using technical and fundamental analysis. Fees typically include spreads, overnight financing charges, and potential commission fees, depending on the broker and platform used. However, the true beauty of the Oil Spread trade lies in its hedging potential, where one trade is likely to outperform the other.

CFDs on WTI Crude Oil

CFDs are leveraged derivatives, which means you’ll get exposure to the full value of the underlying oil market by only paying a deposit – called margin. For instance, with leverage, if you wanted to open a position worth $1000, you’d only need to put down $100, which is equivalent to a 10% margin. Leverage is designed to help traders diversify their margin across multiple assets without needing to deposit large sums into their brokerage account. It’s a product that appeals to every kind of trader due to its simplicity, and flexibility. WTI is the U.S. benchmark, known for being light and sweet, making it easy to refine. The global shift towards renewable energy is gradually reducing reliance on fossil fuels, including oil.

Using technical analysis in oil trading

Please read our RDN and other legal documents and ensure you fully understand the risks before you make any trading decisions. While margin can magnify profits on successful trades, it can also magnify losses on trades that go against the trader. Over time the move away from the use of CO2-producing fuels and sources of energy, is likely to shrink oil demand. And that means this energy transition will take decades and trillions of dollars of investment to achieve. Additionally, developing and highly populous nations in Asia are just beginning to transition their economies away from fossil fuels. Consequently, demand for oil and gas in these regions could potentially grow over the medium term.

This means that when either Brent or WTI rises or falls, the other oil product’s price also follows – they are crude oil cfd practically moving in the same direction most of the time. Brent Crude, often referred to as UKOIL, refers to oil coming from the North sea. This benchmark oil is extracted from the North Sea and primarily refined in Northwest Europe. It is crucial in setting prices for imported crude oil in regions like Europe and North Africa. Looking at past data from Alchemy Markets’ USOIL price feed – from January 3rd, 2021 to October 9th, 2024 – we can clearly see that 12PM to 4PM, UTC/GMT time, are peak hours to trade oil CFDs.

Ways to trade

Traders use various tools, such as trend lines, moving averages, and oscillators, to identify entry and exit points for their trades. Oil is priced in US dollars, meaning that changes in the value of the dollar relative to other currencies can affect oil prices. A stronger US dollar often leads to lower oil prices, as it becomes more expensive for holders of other currencies to buy oil. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. Brent crude is also a sweet light crude, originally produced in the Brent oil fields located in the North Sea between the UK and northern Europe in 1976.