Brent crude trading strategies
Brent Oil blend is classified as sweet light crude oil based on its low sulphur content sweet and low density light. Sweet light crude oil blends are ideal for the energy market as their refining produces more natural gas , gasoline and diesel than other blends. Brent is extracted from the North Sea coasts, between the United Kingdom and Norway, and therefore production and transportation costs are significantly low. Brent Oil was originally traded in the London International Petroleum Exchange through open outcries.
In , oil trading activities were digitalised and moved to the electronic trading environment of the Intercontinental Exchange ICE. However, the recession of rode Brent Oil prices on a rollercoaster like the rest of the markets, as well. However, their prices vary. The price differences between Brent and WTI crude oils can occur due to physical differences between blends, changes in supply-and-demand, inventory numbers, improvements in extraction and transportation methods, developments in refinery technologies, and geopolitical events in the oil production zones such as political tensions, natural disasters and wars.
Although the production rate and the barrel price of Brent are significantly higher, oil resources in the North Sea are depleting rapidly. On the other side of the Atlantic, the American Shale Revolution is expediting the development of WTI drilling and fracking technologies, while increasing the production rates and decreasing the costs.
As a result, WTI barrel price is becoming cheaper than Brent and constituting a strong competition as a global benchmark. Until , Brent crude prices were usually lower than WTI crude. As one of the leading commodities around the world, liquidity is always high. However, the oil prices are not short of volatility as the value is largely determined by the supply and demand levels of the oil products and market sentiment towards them. However, participating in these exchanges are incredibly costly and require meeting rigorous criteria such as professional license and minimum capital amounts.
As Forex traders, we can enjoy the benefit of Brent Oil CFD trading to avoid all that hassle and still capitalise on the Brent price movements. Fundamental analysis of Brent Oil mainly focuses on the factors which can affect the supply and demand levels, decisions by large oil cartels like OPEC, and economic events in the USA. However, the most important factor to consider is the market sentiment as the price of oil is mostly determined by the trades in the futures market.
Oil refining yields a wide range of products such as heating energy, vehicle fuel, plastic as raw material, machine oil, and asphalt. The demand for oil is generated by the activity in these sectors. As the demand increases, Brent Oil price increases, as well.
Oil companies would refine more crude oil, and the supply will drop. However, if the demand falls, the oil refining or processing rates would drop, and the amount of stored crude oil will increase, leading to a supply glut and reducing the price. Their power on the oil supply allows them to control the global oil prices, including Brent, by deciding to cut or hike oil production rates. Social uprisings and wars between producing countries can disrupt the oil production and trade processes, discouraging energy investors from maintaining their short-term investments in Brent Oil.
All assets in the Energy industry are traded globally against the U. Therefore, when the value of USD changes after economic reports from the U. For instance, if the U. Market sentiment refers to how investors, who trade oil futures, perceive the future supply and demand rates. Investors analyse the current oil industry events and predict potential outcomes.
They invest in future delivery contracts accordingly. Rather than purchasing oil at its spot price, storing and then waiting for its value to increase within the market to then be sold again, futures prices predict how much the oil will be worth when it expires on the set date.
It is an easier way to take advantage of price fluctuations without physically owning the underlying asset. However, trading oil futures can be a risky process as futures prices will also fluctuate depending on the price of oil, which is impacted by many external factors. Read more about futures trading.
A slightly different method of oil investment is through ETF trading. Exchange-traded funds are a type of investment fund that can grant traders exposure to the oil market through holding a collection of underlying assets, which in this case would be shares in oil companies. Crude oil ETFs are bought and sold in the same way as many other shares in the stock market. When the price of oil fluctuates, this also has an influence on the share price of oil companies and subsequently, the value of the ETF.
It can be difficult to trade oil stocks in the long-term as the value and price of oil is constantly changing, therefore many traders prefer to use more short-term trading strategies, such as day trading. This way, the ETF value is reflected in the daily price change of oil and it is easier to analyse trends in price charts and graphs in order to predict future movements. Similar to spread betting and CFD trading, an oil exchange-traded fund is a collection of shares that can be traded within the market but the trader still does not own the underlying asset.
How to Trade Like a Professional Oil Trader - Crude Oil Trading Tips
It is important to remember that leveraged ETFs are complex financial instruments that carry significant risks. Certain leveraged ETFs are only considered appropriate for experienced traders. Aside from the trading product that you decide to use, there are also various trading strategies that are better suited for the commodities market. For example, day trading oil is a popular strategy that aims to take advantage of price movements on a short-term basis. As we have discussed, the price of oil can fluctuate often, and although the raw material usually boasts a fairly low spread and a general market stability, it is still possible to make money from small price movements.
Crude oil is one of the most liquid commodities within the market, which means that it can be traded in large volumes and there is extensive data to analyse. This will give an insight into market trends and also help to build knowledge of the asset itself. For example, fundamental analysis is useful in evaluating the value of oil, through company financial statements, oil trading news releases and the general economic stability of a region that you are trading in.
For example, if there is a news announcement of an oil spill or cut in production, this will affect the price of oil and its trading companies, which will need to be factored into your trading strategy. This is considered fundamental analysis. However, both strategies are needed for oil trading, as the commodity can be highly volatile and therefore it benefits to use a comprehensive perspective.
Brent Crude oil analysis june 2021
This will give you further exposure to the commodities market, while also helping to diversify your trading portfolio. We also have a brand new Oil and Gas share basket , where you can spread bet and trade CFDs on the top 10 US-based oil stocks within the industry.
Our share baskets come with lower holding costs and on top of this, traders do not have to pay commission. Learn more about our share baskets. Explore our crude oil trading platform , Next Generation. We offer exclusive features for live account holders, such as a trading forum and access to unlimited technical analysis tools. Traders are able to trade our share basket products with a demo account, but a live account will grant you access to stock trading on a vast number of oil companies, such as BP, Chevron, ExxonMobil and Royal Dutch Shell.
Active and volatile, with opportunities for day trading and long-term investing
Open a live account now. CMC Markets is an execution-only service provider. The material whether or not it states any opinions is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is or should be considered to be financial, investment or other advice on which reliance should be placed.
- forex capital gain tax!
- How beginners can trade supply and demand imbalances.
- Oil Trading: How to Trade Oil in the UK | CMC Markets.
- Futures Movers.
- Top Three Technical Indicators for Oil Traders.
- forex order flow scalping.
- Trade Brent Crude | How to Trade Brent Crude Oil | ?
No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.
See why serious traders choose CMC. Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.
Commodity contracts — Moscow Exchange
You should consider whether you understand how spread bets and CFDs work and whether you can afford to take the high risk of losing your money. Log in. Trade on the go Download our apps. Home Insights Learn to trade Trading guides Oil trading. See inside our platform. Start trading Includes free demo account. Quick link to content:. Types of crude oil The type of crude oil depends on the geographic location of the oil field and the characteristics of the oil itself. Up to two-thirds of global oil contract trades are on Brent. It is referred to as 'light sweet crude oil' due to its low density and low sulphur content.
These characteristics make it less expensive to produce and easier to refine than 'heavy' or 'sour' oils. WTI is the main benchmark for oil consumed in the US.