Oil is one of the most important resources fuelling modern civilisation – and that makes it one of the world's most popular and exciting trading commodities. At Axi, the main way to trade oil online is through Cash CFDs and Futures CFDs.
The two main ways to trade oil online are cash CFDs and oil futures CFDs.
Oil Cash CFDs: This involves buying oil at the current market price. This is the simplest way of trading oil and should only be used when the investor is confident that oil prices will rise in the immediate future.
Oil Futures CFDs: Oil futures contracts are a more sophisticated form of investment than Cash CFDs. If you believe the price of oil will be higher in the future, you can enter into a contract with a seller to agree on a fair price to be paid today so that when the physical oil is delivered upon contract expiry, you can sell the physical oil for more than what you paid for it.
Find out more about how oil trading works.
Follow our process to start oil trading today:
The amount of money needed to start trading oil will depend on your goals, the oil products you want to trade and whether you want to trade using leverage.
Alongside our highly competitive spreads, Axi ensures low cost trading by not charging brokerage fees and commissions on standard accounts. This lowers the barriers of entry in terms of the amount of capital you need to begin trading commodities online, meaning you can start with as little as $50.
When trading oil CFDs with Axi you can enjoy low margins from as little as 10%, allowing you to take advantage of leverage and using a small amount of capital to gain full exposure to a trade. Note that while leverage offers the potential for large profits, it can also increase the risk of losses. Please ensure robust risk management practices when applying leverage.
Because of its importance to the global economy, oil is always in the headlines. But there are some regular announcements and data releases that are essential reading for oil traders, especially the Energy Information Administration (EIA) Crude Oil Inventory and the Organization of Petroleum Exporting Countries (OPEC) Joint Ministerial Monitoring Committee.
The EIA measures the change in the number of barrels of crude oil held as inventory by commercial firms from the previous week. OPEC is the orgnaisation that moves the oil market the most by discussing a wide range of issues relating to energy, and agreeing upon how much oil should be produced by each country.
Technical analysis is a skill that can be easily picked up and learned. However, it is not a skill that is easily mastered! The idea behind technical analysis is that the oil markets are made up of a large number of participants reacting based on greed or fear. By understanding the long term trends and risk sentiment of the market, traders can attempt to generate profit from price movements.
To perform technical analysis, you apply indicators to charts which can help identify trends. By combining this with your own assessments of the price action of oil products, you can discover entry points to the market.
The physical oil market is largely unregulated as there are only a few corporations controlling the mining and refining process before exporting the product across the world. This oligopoly makes it tough for regulators to carry out regulatory checks in a transparent manner.
However, generally, in the USA, there are both federal and individual state agencies that try to regulate the domestic oil market through means of energy and environmentally related laws and policies. For the rest of the world, the Organisation of Petroleum Exporting Countries (OPEC) – made up of 13 different member countries – meets regularly to discuss and agree on production levels of oil produced by each country. By regulating production levels, OPEC controls the price of oil via a simple supply and demand mechanism.
OPEC stands for Organisation of Petroleum Exporting Countries. There are currently 13 member countries that sit within the group. According to the OPEC statute, the purpose of the group is to coordinate and unify petroleum policies of its member countries to ensure stabilization of oil markets in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers and a fair return on capital for those investing in the petroleum industry.
The oil trading market is split up into two trading sessions: Brent crude oil and West Texas oil.
The trading hours for Brent crude oil are Mon - Fri 01:00 - 22:59 GMT.
The trading hours for West Texas oil are Sun - Fri 18:00 - 16:59 EDT.
There are two main types of risk associated with oil trading.
The first is risk associated with trading itself. Oil is a commodity that is traded on futures markets and offers a high degree of leverage. Using high levels of leverage can be risky as there is potential to lose more than what you have deposited. Traders should apply robust risk management strategies whenever leverage is being considered.
The second key risk is associated with oil. Because it is a commodity and the price is greatly influenced by wider supply and demand factors, oil prices can be volatile. For example, a political decision or change in environmental policy can cause the price of oil to drop suddenly.