Crude oil is one of the most important resources on the planet. Its price reflects the state of the global economy. Oil is extremely popular in the financial markets. Many factors influence its rate, so even experienced analysts find it difficult to predict the cost of the black gold.
In this article, you will learn what factors to consider when trading oil, where and how to buy it, and what strategies to choose when trading this asset.
The article covers the following subjects:
Major Takeaways
- Although oil can be a highly profitable asset to trade because of its price volatility, it also involves significant risks that require in-depth market analysis and proper money management.
- Oil prices are determined by the balance of supply and demand, geopolitical events, OPEC+ decisions, global inventory trends, and macroeconomic indicators of major countries.
- Brent (Europe and global markets) and WTI (US) are the most actively traded benchmark crude oils, alongside Dubai Crude, Urals, and others.
- The key exchanges for oil trading are ICE (Brent contracts) and NYMEX (WTI). Standardized futures contracts traded on these exchanges form global price benchmarks. Gasoline, diesel, and fuel oil are also actively traded here. These markets reflect the state of the global economy and the energy sector.
- Instruments include CFDs on spot prices and futures, as well as options, ETFs, and oil stocks, each with different risk levels.
- Major exchanges operate nearly 24 hours a day on weekdays, allowing traders to respond quickly to news around the clock.
- Key advantages are high liquidity and clear fundamentals, while drawbacks include high volatility and sensitivity to political events.
- Effective strategies involve technical analysis, trading on fundamental data (such as OPEC reports), and scalping during major news releases.
Should I Trade Oil?
Nearly every market participant has traded oil at some point. Its prominence in the media helps sustain strong market interest. With thousands of trades executed daily, oil ranks among the most liquid assets alongside gold and the US dollar.
Traders can choose from a range of instruments such as futures, options, and CFDs. In oil markets, CFDs are often preferred for their simplicity and accessibility. Unlike futures and options, they do not require large upfront capital or additional platform fees, making them attractive to both seasoned traders and beginners.
Get access to a demo account on an easy-to-use Forex platform without registration
What is Driving Oil Price?
Crude oil is extremely popular and in demand, so quite a few factors influence its price. They are divided into permanent and temporary.
Permanent factors:
- Supply and demand. Oil quotes, like any other commodity, depend on the volume of supply and demand. These are relatively constant values since contracts for the oil supply are concluded based on future deliveries. A good analyst always knows the supply volume for years ahead. Another thing is when the largest exporters and importers experience force majeure, which may affect the execution of these contracts.
- Seasonal factor. Despite the fact that oil contracts are planned years in advance, there are certain periods when the activity of buyers and sellers increases. As a rule, oil trading is very active in the first quarter of the year as new contracts are concluded and old ones are reviewed. On the contrary, in the fourth quarter, trading activity is declining. Buyers and sellers are trying to complete all their transactions before the New Year holidays.
- OPEC+. The organization sets production quotas to manage oil supply. Decisions to cut or increase production shape long-term market trends and impact price volatility.
- US dollar. Since oil is priced in dollars, a stronger greenback makes it more expensive for buyers using other currencies, reducing demand and putting pressure on prices. A weaker dollar has the opposite effect.
Temporary factors:
- Change in oil production capacity. With an increase in production, oil-exporting countries will be interested in delivering more to the market. If this supply is absorbed by the market, it is a positive signal. However, if supply exceeds demand and no one wants to buy oil, its price will decrease.
- Change in oil reserves in storage facilities. Every week, the EIA and API, the world’s largest energy organizations, publish data on oil reserves in US storage facilities. A sharp change in these data compared to the previous week could trigger major price fluctuations.
- Force majeure events. During the COVID-19 pandemic, oil demand in China and the EU declined sharply, contributing to a historic price collapse that eventually pushed US crude futures into negative territory. In March 2026, supply disruptions emerged amid escalating tensions between the US, Israel, and Iran, along with concerns over a potential blockade of the Strait of Hormuz. As a result, Brent crude prices surged from around $73.00 to the $110.00–126.00 per barrel range.
- Market sentiment. Market sentiment is a key pricing factor for any asset, including oil. Even if demand is fully met, the market is always vulnerable to large speculative activity. If a large amount of money is poured into the market, then nothing can stop the price rise, which will bring losses to many. However, this amount must be very large.
Oil Grades Available For Trade
Major crude oil producers are promoting their own brands to the market. For example, Russian URALS or the Saudi Arabian ARAB LIGHT. However, there are also internationally recognized grades of the black gold, which are traded on all world exchanges. For example, North American WTI (USCRUDE) and global Brent (UKBRENT).
USCRUDE
USCRUDE is a light North American oil that is typically a few dollars cheaper than Brent. The cost of USCRUDE is pegged to the US dollar. It is possible to trade CFDs 24 hours a day. However, if you trade USCRUDE as futures, the trading hours are determined by the exchange where you buy the contract. Traditionally, purchases are encouraged, meaning the swap of long trades will be positive. But bearish trading will cost quite a lot due to the high swap.
UKBRENT
UKBRENT is a benchmark grade of oil, slightly more expensive than WTI. The cost of Brent is pegged to the US dollar. It is possible to trade UKBRENT CFDs 24 hours a day. If you trade Brent as futures, the trading hours are determined by the exchange where you buy the contract. Traditionally, purchases are encouraged, meaning the swap of long trades will be positive. Sell trades are subject to a higher swap fee.
Oil Futures Markets
Many novice oil traders often have a question about where to trade oil futures. This can be done on centralized exchanges. The largest is ICE or Intercontinental Exchange, with offices in London, New York, Chicago, and Singapore. The largest branch of ICE is located in London, where up to 60% of commodity futures for gold, crude oil, gas, and other popular commodities are traded.
How to Trade Oil
Where is oil traded on the stock exchange? To do this, it is not necessary to enter a commodity exchange and make transactions with physical delivery. Electronic exchanges such as Forex allow traders to trade CFDs. Also, major stock exchanges in any country in the world provide the opportunity to trade futures or options and invest in ETFs.
Oil CFDs
Oil CFDs are one of the most affordable types of oil trading that do not require large investments. As a rule, Oil CFDs are traded in the Forex market, allowing traders to profit from the difference between the opening and closing prices. At the same time, speculators do not need to own physical oil, as it is enough to have a small deposit.
Oil Futures
Oil futures contracts are slightly different from CFDs, but it is the futures that serve as the basis for calculating CFDs. A futures contract is an agreement between a seller and a buyer that guarantees the fulfillment of delivery obligations at a pre-agreed price and time. Unlike CFDs, futures are limited in time with a specified expiration date.
Oil Options
Options are contracts that give the buyer the right, but not the obligation, to buy or sell an asset at a predetermined price and time. There are two types of options: CALL and PUT. A CALL option gives the buyer the right to buy the asset, while a PUT option gives the right to sell it. Options are based on an underlying asset, such as oil, and are typically traded as derivatives of oil futures contracts.
Oil ETFs
Oil ETFs are common exchange-traded funds that invest in oil companies. As a rule, ETF portfolios include shares of major oil producers. However, in recent years, oil ETFs based on derivative financial instruments, such as oil futures and options, have become increasingly common on stock exchanges.
Oil Stocks
Buying oil and gas companies’ shares is another way to make money from oil. Quotes of black gold are closely dependent on its production volumes, so the share price of such companies is closely correlated with oil volumes. Pay attention to the price charts of oil companies and oil stocks, and you will notice the similarities.
The charts above show prices for UKBrent crude oil and Chevron Corporation, one of the largest oil companies. As you can see, prices have been moving in sync since the beginning of 2020. However, the company’s share prices are more stable than oil prices due to volatility and other factors.
Oil Trading Hours
Trading hours will vary depending on the exchange and the type of oil contract. Trading hours of futures and options on the ICE exchange are determined by stock exchange hours. If traders purchase a CFD in Forex, they can trade oil 24 hours a day, five days a week.
When it comes to trading time regarding the oil trading strategy, there are several periods when online oil trading is more active.
Start Trading on the Chicago Mercantile Exchange
The Chicago Mercantile Exchange is one of the world’s largest commodity exchanges, where futures and other oil contracts are traded. The trading on CME starts at 16:00 LiteFinance trading server time (displayed in the trading terminal).
This period is very profitable for oil CFD day trading, as volumes rise sharply at the opening of trading and the intraday trend changes very often.
Release of EIA Reports on Oil Reserves
When trading oil in the short term, it is important to follow the EIA weekly report releases. As a rule, US oil reserves data is published on Wednesday at 17:30 (LiteFinance trading server time). However, the data release is moved to Thursday if holidays fall on a Monday or Tuesday. The release time does not change and is recorded in the economic calendar.
The moment of data release is important for the local trend since, at this time, the price of oil fluctuates significantly during online trading. Generally, if, according to the data, oil reserves are declining, market participants regard this as a signal to buy. If oil reserves increase, this can be regarded as a sell signal. However, the best strategy is to place pending orders in both directions. In this case, it is possible to open a profitable trade, regardless of the further price direction.
Advantages and Disadvantages Of Trading Oil
Trading Forex instruments online, including crude oil, is risky. For this reason, I made a list of the pros and cons of crude oil trading.
|
Advantages |
Disadvantages |
|
Portfolio diversification |
High volatility |
|
High profit potential |
Complex structure of contracts |
|
|
A large number of factors affecting prices |
Oil Analytics
It is much more difficult to analyze the dynamics of oil prices compared to currency quotes. The cost of black gold depends on many factors that must be considered. It is important to understand how they affect the price.
Fundamental Analysis
The fundamental factors that can affect the ratio of crude oil supply and demand are listed below:
- changes in production levels by major producers, including OPEC and non-OPEC countries;
- fluctuations in US crude oil inventories;
- demand trends in key importing regions such as China, India, and Europe;
- investor demand for oil-related assets;
- speculative sentiment and force majeure events;
- trade policies and tariffs, including trade wars, sanctions, and restrictions that can disrupt supply chains and increase volatility;
- technological developments like AI and mining that raise energy consumption and may support oil demand.
For example, oil prices jumped when the armed conflict between Iran, the United States, and Israel broke out in March 2026.
The launch of the US military operation Epic Fury against Iran, supported by Israel, initially caused Brent prices to fluctuate between $75.00 and $83.00. Prices then surged to $115.00 and climbed even higher as the Strait of Hormuz was blockaded and mined, oil tankers were destroyed, and Iran attacked US bases, energy facilities, and refineries across the Middle East.
Technical Analysis
Technical analysis of the oil price relies on studying price charts and patterns. Meanwhile, the time frame is not critical.
The most effective techniques for analyzing oil prices include:
- Elliott Wave analysis;
- candlestick patterns with strong volume.
If you are not familiar with these methods, you can read market reviews and analyses from experienced authors.
Best Oil Trading Strategy
There are many strategies for trading oil, and the choice depends on the trader’s investment timeline and goals. Below are several approaches that are considered the most reliable.
Trading US Oil Data
Before the API and EIA reports, two pending orders are placed: a buy stop above the current price and a sell stop below it. This way, whichever direction the market moves, one order is triggered automatically.
Oil Volume Candlestick
This strategy originates from the foreign exchange market and is based on identifying a high-volume candlestick on the 4-hour chart. After such a candlestick appears, pending orders are placed.
The strategy has proven effective and is widely used in oil trading.
Oil Spread
This strategy is less common among retail traders due to its longer time horizon (weeks or months). It is based on the price difference between Brent and WTI crude oil. When the spread widens, traders sell the more expensive grade and buy the cheaper one. When it narrows, they take positions expecting it to widen again.
For example, during the OPEC+ meeting, two pending orders were placed in opposite directions. After the results were announced, the buy stop was triggered, and a long position was opened. Once the take profit level was set, the sell stop was canceled.
Half an hour later, the price had almost reached the target, and the trade was closed with a profit of $175. This shows that trading on news can be effective in the short term.
Day Trading Oil
To trade oil intraday, you need to consider global factors. However, strong intraday price moves do not always occur, so strategies based on price patterns are often preferred. Technical indicators such as the RSI, Bollinger Bands, and EMA tend to lag, and high volatility in the oil market can further reduce their effectiveness.
Analyzing price action movements across time frames is generally more effective. The market often shifts when the Chicago session opens, so intraday trades are typically closed by 16:00 LiteFinance server time.
- Ahead of the market open, trading decisions are typically based on chart patterns such as Head and Shoulders, Triangles, Flags, and Harami, identified on the M30 and H1 time frames.
- Around 16:00, most traders close their positions. Thus, you can wait for a reversal signal on the H1 chart and open a trade in the direction of the new trend. As the trade moves into profit, the stop-loss is moved to breakeven. If the position is stopped out, trading is postponed until the next day. If the price continues to move in favor of the trade, a trailing stop is used until the price reaches the take-profit level.
This strategy reduces risk and provides stable returns under favorable conditions.
When to Buy Oil
To answer this question, it is important to understand oil pricing. As mentioned above, it is possible to trade black gold in the long term and in the short term.
Long-term Oil Investment
To buy oil in the long-term, it is necessary to set a time frame. The key factors here are global supply and demand.
Demand is affected by consumption by importing countries, production activity, and force majeure.
Example. In 2020, strict restrictions were imposed in China due to the COVID-19 pandemic. Business operations were halted, and oil demand plummeted. As a result, prices fell sharply.
Short-term Oil Investment
When using short-term strategies like intraday trading, there is no need to focus on global factors. Instead, choose a suitable approach, such as news trading, and rely on current analysis and forecasts.
Example. The EIA publishes weekly data on US crude oil inventories. Assume analysts expect inventories to rise by 5 million barrels, prompting the market to slide in anticipation. However, the actual data shows a decline of 7 million barrels. This creates a temporary shortage, causing prices to go up.
How Do You Buy Oil
There are various ways to buy oil, and the choice depends on your goals and strategy. Various platforms offer different types of trading instruments.
Futures and CFDs
The most common way is to buy oil futures or CFD contracts. Traders can buy futures on the stock exchange and oil FX CFDs in the Forex market.
ETF Purchase
It is also possible to buy oil ETFs. The most widely used oil ETF is the US Oil Fund, which tracks price fluctuations and allows investors to profit from them.
Stocks of Oil Companies
Oil quotes very often correlate with stock quotes of major oil companies. It would be profitable to form an investment portfolio from the shares of such companies as Shell, ExxonMobil, Chevron, and Rosneft.
Choosing The Right Broker For Oil Trading
While financial markets are highly competitive, dishonest brokers and fraudulent schemes still exist. Competition alone does not guarantee reliability, so it is crucial to check a company’s licenses and reputation before getting started.
Key criteria for choosing a broker:
- at least 10 years of experience;
- a wide range of account types;
- access to the MetaTrader platform;
- support for ECN accounts;
- a diverse selection of trading instruments;
- access to CFDs on NYSE and NASDAQ-listed assets;
- the ability to trade UK Brent and US crude oil;
- a built-in trading calculator;
- responsive customer support;
- availability of affiliate programs.
If a broker meets these criteria, it can be considered a reliable choice. For example, LiteFinance meets these requirements and offers a solid trading environment.
Price chart of USCRUDE in real time mode
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteFinance broker. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2014/65/EU.
According to copyright law, this article is considered intellectual property, which includes a prohibition on copying and distributing it without consent.
