Oil Trading

Trade Crude Oil

Crude oil has been one of the most popular assets in the commodities market for many years. Is it the right focus for you, though? We are here to help you determine if oil trading can be beneficial to your portfolio or not.

A few interesting facts about Oil Trading

Although it’s called ‘Oil Trading’ colloquially, oil trading covers far more than you might think. Remember that crude oil is at the heart of anything that has a combustion engine – petrol, oil, diesel, even paraffin demand can have an impact on this market. Although it may seem intimidating at first, it’s quite the contrary. There are very good indicators that can provide insight into the future direction of the oil markets in the near term.

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We at CMTrading believe that oil trading can offer your portfolio a lot of advantages. These include:

  • Oil is in a constant demand in today’s market.
  • The transportation and automotive industry have an ever-growing demand for oil.
  • Oil is easy to produce and refine, while alternative energy sources haven’t reached that level of efficiency yet.
  • Oil production is fairly vulnerable to supply shocks and geopolitical conflicts and the volatility can translate to higher profit potential.
  • Oil is a highly competitive and liquid market with high intraday volume.

Understanding the Oil Market

Although it may seem a bit intimidating at first, it’s actually very easy to understand how to leverage oil trades to your advantage. There are a few key principles a lot of traders swear by: Firstly, know your two benchmarks; Brent Crude and WTI (West Texas Intermediate) oil are two major benchmarks that are traded on the financial markets. Brent Crude refers to the price for European, African and Middle Eastern oil while WTI represents the price for oil in North America.

Don’t discount politics. Typically, you need to consider Europe, Russia, the US and the OPEC countries (the Middle East and South America) and China is a rising player. Consider global and domestic production if you’re in an oil producing country. Remember drilling for oil is expensive and that’s why they keep trying new techniques. Ultimately, demand is what drives the production and consequently the price. These are the driving factors around oil prices and familiarizing yourself with these aspects can help you identify potential opportunities in the oil markets!

Always keep on top of the news to know how these different factors are playing off of each other. Global demand for oil may be rising, while domestic demand is falling. OPEC could be withholding supplies. Fracking sites could be opening. All of these will affect the oil market. Past that, some time spent with historical market figures (while never be indicative of future performance) will be all you need to understand the basics of the oil market and its quirks. Oil trading can be particularly rewarding for traders, especially if you can take advantage of CMTrading’s award-winning platform. Start trading oil with CMTrading today!