{"id":9289,"date":"2023-05-25T06:13:49","date_gmt":"2023-05-25T06:13:49","guid":{"rendered":"https:\/\/vtmarketsc3stg.wpenginepowered.com\/?p=9289"},"modified":"2023-05-25T06:13:49","modified_gmt":"2023-05-25T06:13:49","slug":"oil-cfds","status":"publish","type":"post","link":"https:\/\/www.global-vtrader.com\/ar\/learn_forex\/9289\/","title":{"rendered":"Oil CFDs"},"content":{"rendered":"\n

Oil is a major energy commodity that is relied on globally to produce gasoline, diesel and petrochemicals that power much of the world\u2019s activities. Like all hard commodities<\/a>, it\u2019s a raw material on which much of the global economy relies \u2014 in fact, it\u2019s the most commonly traded commodity in the world. That volume of trading has created many derivative financial products, including oil CFDs. 
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The oil and gas industry<\/strong><\/p>\n\n\n\n

There are different types of oil that are traded internationally: crude oil, no lead gasoline, natural gas and heating oils. While some of these oils tend to be traded more locally, crude oil remains the largest of these sectors in terms of trade and is sourced from different points of origin around the world. The volume of crude oil trading and its varied points of origin mean that this asset is particularly vulnerable to geographic, political and economic instability, all of which make the market particularly volatile. <\/p>\n\n\n\n

Volatility in markets spells both risk and opportunity for traders because they increase the size and frequency of price fluctuations. If you want to gain exposure to the oil market and potentially capitalise on some of the profitable opportunities yourself, learning how to trade oil CFDs could be a good method to do so.<\/p>\n\n\n\n

In this article, we\u2019ll define what oil CFDs are, how they fit into the oil market and what you\u2019ll need to know before you start trading oil CFDs as an individual trader. <\/p>\n\n\n\n

Understanding how <\/strong>oil CFDs<\/strong> work <\/strong><\/p>\n\n\n\n

CFDs are a type of derivative financial product that allows traders to get exposure to a market like oil trading without having to take possession of an underlying asset. CFD trading works<\/a> by creating an agreement between an investor and a CFD broker \u2014 or more simply a buyer and seller \u2014 to exchange the difference in value of the underlying asset between the opening and closing of the contract. <\/p>\n\n\n\n

Unlike buying or selling the physical asset, oil CFDs (and any kind of CFDs) don\u2019t deal with the buying and selling of a commodity; they make traders profits through the speculation on the changes in price of the asset. The changes are what generate profit or loss in this situation. Successfully trading CFDs<\/a> requires a trader to understand the reasons and trends behind movements in the market, in order to successfully predict what moves will play out during a CFDs duration.   <\/p>\n\n\n\n

What are oil CFDs<\/strong>?<\/strong><\/p>\n\n\n\n

Essentially, oil CFDs allow more traders to gain exposure to the large oil market through the use of leverage and without taking possession of the asset itself. This increased exposure can diversify your investment portfolio and, in doing so, lower your risk. Oil CFDs are used as a conduit for investors to trade in oil spot prices, oil futures and oil options. As the most commonly traded benchmarks of crude oil, most oil CFDs are concerned with WTI or Brent Crude Oil. <\/p>\n\n\n\n

WTI vs Brent Crude Oil prices<\/strong><\/p>\n\n\n\n

If you want to get into trading oil CFDs, it\u2019s almost certain that you\u2019ll be dealing with the two most common types of crude oil in the global market: West Texas Intermediate (or WTI) Crude Oil and Brent Crude Oil. Crude oils are rated for their density and their \u2018sweetness\u2019 or \u2018sourness\u2019 when it comes to assessing quality. Low density crude oils are preferred because they are easier to process and refine, while sweetness refers to the sulphur content in a given crude oil. The sweeter the oil, the lower the sulphuric content, which also makes refinement and processing cheaper. <\/p>\n\n\n\n

Understanding the key differences between these two and their defining features is a crucial part of fundamental analysis \u2014 something you\u2019ll need to be across when trading oil CFDs. At a glance, here\u2019s a snapshot of both types of crude. <\/p>\n\n\n\n

Brent Crude Oil <\/strong><\/p>\n\n\n\n