Crude Oil Spread Betting Guide

Crude Oil Spread Betting Guide

Crude Oil Spread Betting Guide

arrow_forwardLive Crude Oil Chart
arrow_forwardLive Crude Oil Prices
arrow_forwardWhere to Spread Bet on Crude Oil
arrow_forwardHow to Spread Bet on Crude Oil
arrow_forwardHow to Spread Bet on US Crude Oil


Live Crude Oil Chart and Prices



8 November 2017: Will Crude Continue Higher?

If you’re trading crude oil, here’s a useful 4 minute video looking at the technical analysis side of things.

Note that the video covers the Brent cash rather than Brent futures (the cash market is better for long-term analysis).




7 November 2017: Brent and US Crude Hits Fresh 2 Year Highs But the Politics Remains Unclear

Is Mohammad bin Salman trying to copy and paste from the Chinese President’s playbook?

We’ve got a short article on: Crude at Fresh 2 Yr High But Can the Saudi Crown Prince Copy Xi Jinping?



6 November 2017: US Crude to See Further Gains?

US crude oil has extended gains past $56 on the new Saudi anti-corruption purge.

Theoretically, the purge would help to consolidate Crown Prince Mohammad bin Salman’s power and the Crown Prince is in favour of extended OPEC‘s production cuts.


2 October 2017: Funds Getting Longer of US Light Sweet

The latest COT report is showing that the hedge funds are getting increasingly bullish of crude.

In the 29 August 2017 report they were 2.2:1 long of ‘US Light Sweet’. Over the last 5 weeks that has steadily increased.

In the latest report, the big speculators were 3:1 long.


15 September 2017: US Crude Still Struggling with the $50 Support

The US crude oil market is still struggling with the $50 resistance level – see chart below.

It’s tempting to short crude and put a Stop Loss around $51 with Limit Order at either $48 or $49 depending on how much risk you want to take on.

Warning: crude oil (November) futures are currently trading about $1 higher than crude oil (October) futures but the October contract closes on 19 September.

No trade yet, I’m still thinking about this one.

US Crude Oil: 15 September 2017


20 July 2017: Supply Flooding Oil Market Despite the Increased Demand

Below, an interesting look at the current state of supply and demand in the crude oil market:


About the Crude Oil Market

Oil is a highly sought after commodity and, along with gold, crude oil is one of the most traded commodities in the financial markets. This is also true when it comes to financial spread betting.

An obvious reason for such a prominent position is the fact that oil products form the basis of much of modern day transportation, power and plastics manufacturing.

Investors who trade in crude oil markets should be aware that they can be volatile. The price of crude oil is often affected by supply factors that include:
  • Severe Weather Conditions: for example hurricane season in the Gulf of Mexico
  • Conflicts: for example political problems in the Middle East or attacks on pipelines in Nigeria
  • OPEC: The Organisation of Petroleum Exporting Countries who try to control supply in order maintain a high price
Other oil price factors include:
  • Stock market prices: as the World economy recovered in 2009 shares prices increased. At the same time crude oil prices saw a parallel rise due to the fact that a recovery should lead to an increase in demand for oil. Note that this relationship is not linear, share prices continued to increase during 2010 whilst crude oil pent much of the year stuck in the $70-$80 range
  • US Driving Season: America is the number one oil consuming nation and the US Driving Season usually has an impact on oil prices as demand increases
  • Weekly Energy Information Administration’s (EIA) supply data:

    • Inventory data is usually released every Wednesday at 3.30pm UK time
    • The oil spread betting markets are often volatile just before and just after the new data is released
    • Low inventories suggest low supply and therefore a possible price increase
    • High inventories suggest excess supply and therefore a possible price decrease

Key Crude Oil Markets

There are two major oil markets:
  • Brent Crude Oil
    • Brent Crude is also known as UK Crude Oil
    • It is typically refined in Northwest Europe

  • US Crude Oil
    • US Crude Oil is also known as WTI (West Texas Intermediate), Nymex Crude Oil and Light Sweet Crude
    • US Crude Oil comes from America’s Midwest and the Gulf of Mexico
    • It is lighter than Brent crude oil and will generally, but not always, be priced at a small premium due to its higher quality

Spread Betting on Crude Oil

  • If you spread bet on crude oil you can take a long or a short position on the future price of crude oil. So if, after adequate research, you believe that the oil market will rally, you can spread bet on oil to go up. Of course, if you feel that the market will fall, then you can speculate on that too.
  • Financial spread betting on oil is leveraged and so whilst your profits are amplified so are losses, you can also lose more than your investment/stake. This means that you should be fully aware of the potential pitfalls before placing any bets.
  • When you spread bet your profits are free from capital gains tax and income tax.

Where Can I Spread Bet on Crude Oil?

Most of the FCA regulated spread betting companies offer live prices and charts on commodity markets like Crude Oil.

See the commodities comparison table below.


Crude Oil Spread Betting Comparison

navigate_beforeComparison Scroll navigate_next
Company Commodities
Min Stake
Gold
Spread
Silver
Spread
US Crude
Spread
UK Crude
Spread
Crude Diff.
Spread
Apply
Financial Spreads Review £0.50 4 3 3 3 3 Apply

Review
City Index Review £0 4 (+) 2.5 (+) 5 (+) 5 (+) n/a Apply

Review
ETX Capital Review &pound:0.50 6 3 6 6 Apply

Review
IG Review £1-5 3 3 3 3 no Apply

Review


How to Spread Bet on Crude Oil

As an example, let’s suppose you are thinking of speculating on Crude Oil, you look at a financial spread betting site, such as FinancialSpreads, and they are offering the latest spread:

Brent Crude Oil (March) Futures: $111.35 – $111.40

This is an example of how a Crude Oil futures spread betting market works…

Spread Betting Market Brent Crude Oil (March) Futures
Spread Betting Price $111.35 – $111.40
This Means Now you can spread bet on the Brent Crude Oil Futures market settling:

  arrow_upward  Above $111.40, or
  arrow_downward  Below $111.35

On the expiry date for this ‘March’ futures market, 13 February 2012.

It is important to bear in mind that, because this is a futures spread bet, your position will automatically close itself when the March Crude Oil futures contracts are closed, 13 February 2012. Note that you can also choose to close your position prior to the expiry date.
Traded Units With spread betting futures markets, trades on the Crude Oil market are made in £x per cent.

Where a cent is $0.01 of the energy’s price movement.

E.g. if Crude Oil moves 45¢ ($0.45) then you would lose or win 45 times your stake.
Stake You choose how much you want to stake per cent, e.g. £2 per cent, £4 per cent, £10 per cent etc.
Brief Example For example, if you decided on a stake of £5 per cent and the price of Crude Oil moves by $0.27 (27¢), you would win or lose £5 per cent x 27¢ = £135.


Worked Example | Going Long of Brent (UK) Crude Oil

Online spread betting on the energy market to increase

You Work Out Whether to Go Long or Short Where do you feel Crude Oil will close on 13 February 2012:

  arrow_upward  Above $111.40? or
  arrow_downward  Below $111.35?

You Might Want to Go Long   arrow_downward  Above $111.40
You Select How Much to Risk, Let’s Say You Choose £2 per cent
So Now What?
  • You make a gain of £2 for each cent ($0.01) Brent Crude Oil closes above $111.40
  • You make a loss of £2 for every cent ($0.01) Brent Crude Oil settles lower than $111.40
If You Are Betting on a Market to Rise Your Profit or Loss = (Final Value – Opening Value) x stake per cent
 
Situation 1 The price of Brent Crude Oil increases and the futures market is revised to $112.02 – $112.07.
Time to Take a Profit? You may now choose to let your position run to expiry or close it, i.e. close your position for a profit. In this instance you choose to close your bet by selling the market at $112.02.
Your Profit or Loss = (Final Value – Opening Value) x stake per cent
($112.02 – $111.40) x £2 per cent
$0.62 x £2 per cent
62¢ x £2 per cent
Your Profit or Loss = £124 profit
 
Situation 2 Crude Oil slips and the quote for the market is revised and is set at $110.84 – $110.89.
Limit the Loss? You can decide to let your position run to expiry or close it, i.e. close your trade to restrict your losses. For this example, you decide to settle your trade at the current quote and sell at $110.84.
Your Profit or Loss = (Final Value – Opening Value) x stake per cent
($110.84 – $111.40) x £2 per cent
-$0.56 x £2 per cent
-56¢ x £2 per cent
Your Profit or Loss = -£112 loss


Fully Worked Trading Example | Taking a Bearish View of UK Crude Oil

Financial spread betting on the price of Brent Crude Oil to fall

You Choose to Go Long or Short Where do you think Crude Oil will settle on 13 February 2012:

  arrow_upward  Above $111.40? or
  arrow_downward  Below $111.35?

Let’s Assume You Choose to Go Short   arrow_downward  Below $111.35
You Select Your Stake Size, Choosing £3 per cent
What Now?
  • You make a loss of £3 for every cent ($0.01) Brent Crude Oil settles above $111.35
  • You make a gain of £3 for every cent ($0.01) Brent Crude Oil closes below $111.35
When Betting on a Market to Fall Your Profit or Loss = (Opening Value – Final Value) x stake per cent
 
Situation 3 Crude Oil goes lower and the market becomes $110.96 – $111.01.
Time to Take Your Profit? At this point, you can decide to let your futures trade run to expiry or close it, i.e. close your position to lock in your profit. In this example you decide to settle your bet at the current price by buying at $111.01.
Your Profit or Loss = (Opening Value – Final Value) x stake per cent
($111.35 – $111.01) x £3 per cent
$0.34 x £3 per cent
34¢ x £3 per cent
Your Profit or Loss = £102 profit
 
Situation 4 The price of a barrel of Crude Oil increases and the quote for the futures market changes to $111.61 – $111.66.
Close and Limit Your Loss?You could opt to keep your futures trade open until expiry or close it, i.e. close your position and restrict your loss. In this instance you opt to close your trade at the current rate and buy the market at $111.66.
Your Profit or Loss = (Opening Value – Final Value) x stake per cent
($111.35 – $111.66) x £3 per cent
-$0.31 x £3 per cent
-31¢ x £3 per cent
Your Profit or Loss = -£93 loss



How to Spread Bet on US Crude Oil

As an example, let’s suppose you are considering trading on US Crude Oil (WTI), you look on a spread betting site, e.g. InterTrader, and see that they are offering the real time spread:

US Crude Oil (March) Futures: $98.45 – $98.50

This is what you can expect with this oil futures spread bet:

The Spread Trading Market: US Crude Oil (March) Futures
The Spread: $98.45 – $98.50
How This Works: You can speculate on the US Crude Oil Futures market settling:

  arrow_upward  Higher than $98.50, or
  arrow_downward  Lower than $98.45

When the market closes on the closing date for the ‘March’ market, 17 February 2012.

Be aware that, because this is a futures market, your trade will automatically close when the March US Crude Oil futures contracts are settled, 17 February 2012, but you can also choose to close your spread bet before the expiry date.
Traded Units: Trades on the US Crude Oil market are priced in £x per cent.

Where a cent is $0.01 of the energy’s price movement.

E.g. if US Crude Oil changes by 30¢ ($0.30) then you would lose / win 30 multiples of your stake.
Stake (Trade Size): You choose your stake per cent, e.g. £2 per cent, £3 per cent, £15 per cent etc.
Simplified Trading Exercise: If, as an example, your stake was £3 per cent and US Crude Oil moves $0.28 (28¢), you would lose or gain £3 per cent x 28¢ = £84.


Fully Worked Spread Trading Example | Taking a Bullish View of Nymex (US Crude Oil)

Financial spread trading on the commodity market to go higher

You Choose Whether to Buy or Sell: Where do you think that US Crude Oil will close on 17 February 2012:

  arrow_upward  Higher than $98.50? or
  arrow_downward  Lower than $98.45?

Let’s Assume You Want to Buy:   arrow_downward  Higher than $98.50
You Select Your Stake Size, Let’s Say You Choose: £3 per cent
What Happens Next?
  • You will win £3 for each cent ($0.01) US Crude Oil closes above $98.50
  • Your spread bet loses £3 for every cent ($0.01) US Crude Oil closes below $98.50
When Buying a Market Your Trading P/L = (Settlement Level – Opening Level) x stake per cent
 
Scenario 1 US Crude Oil pushes higher and the price of the futures market is revised and changes to $98.92 – $98.97.
Time to Lock in a Profit? You may choose to keep your futures spread bet open until expiry or close it to lock in a profit. For this example, you choose to settle your position at the current price by selling at $98.92.
Your Trading P/L = (Settlement Level – Opening Level) x stake per cent
($98.92 – $98.50) x £3 per cent
$0.42 x £3 per cent
42¢ x £3 per cent
Your Trading P/L = £126 profit
 
Scenario 2 US Crude Oil goes lower and the oil market is revised to $98.03 – $98.08.
Close and Limit Your Loss? At this point, you may choose to let your futures spread bet run to expiry or close it, i.e. close your trade and restrict your losses. For this example, you decide to close your bet now by selling the market at $98.03.
Your Trading P/L = (Settlement Level – Opening Level) x stake per cent
($98.03 – $98.50) x £3 per cent
-$0.47 x £3 per cent
-47¢ x £3 per cent
Your Trading P/L = -£141 loss


Worked Spread Betting Example | Going Short of US Crude Oil

Online spread betting on the commodity market to go down in value

You Decide to Go Long or Short: Where do you feel that US Crude Oil will settle on 17 February 2012:

  arrow_upward  Higher than $98.50? or
  arrow_downward  Lower than $98.45?

Let’s Assume You Want to Go Short:   arrow_downward  Lower than $98.45
You Select Your Stake, Let’s Assume You Opt For: £2 per cent
So What Happens Next?
  • Your spread bet loses £2 for every cent ($0.01) US Crude Oil closes higher than $98.45
  • You will win £2 for every cent ($0.01) US Crude Oil settles lower than $98.45
When Betting on a Market to Fall Your Trading P/L = (Opening Level – Settlement Level) x stake per cent
 
Scenario 3 US Crude Oil pushes lower and the quote for the futures market is revised and set at $97.92 – $97.97.
Take Your Profit? At this point, you could decide to keep your futures trade open until expiry or close it to take your profit. For this example, you opt to close your trade at the current market price and buy at $97.97.
Your Trading P/L = (Opening Level – Settlement Level) x stake per cent
($98.45 – $97.97) x £2 per cent
$0.48 x £2 per cent
48¢ x £2 per cent
Your Trading P/L = £96 profit
 
Scenario 4 US Crude Oil climbs and the quote for the spread betting market changes to $98.94 – $98.99.
Close and Restrict Your Loss?You could now opt to leave your futures trade open until expiry or close it, i.e. close your trade to limit your losses. In this instance you choose to close your bet at the current quote by buying at $98.99.
Your Trading P/L = (Opening Level – Settlement Level) x stake per cent
($98.45 – $98.99) x £2 per cent
-$0.54 x £2 per cent
-54¢ x £2 per cent
Your Trading P/L = -£108 loss


Crude Oil Example Notes:


AuthorAlex Turner

Senior Editor, SpreadBetMagazine

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