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Learn about the influence of markets with crude oil and explore why it is one of the most actively traded commodities.
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Oil has been colloquially known as black gold for many years, it holds a value due to its use on a day to day basis. Demand for crude oil tends to increase when the economy is growing, it is a necessary asset as it is a source of energy required to produce and transport goods. Oil prices account for inflation, as a rise in the price of oil will increase the price of gasoline, it then becomes more expensive to transport goods, consequently prices of goods go up causing inflation.
Crude oil can be used as a store of value but is chosen as a speculative trade, generally, prices will suffer when markets are not looking very promising and oil can benefit from market moves.
Oil commodity CFDs are traded on margin, which means you don’t have to put down the total value of the asset in order to trade it. You only have a margin requirement as collateral. On a CFD contract of West Texas Oil with the symbol XTIUSD (equates to 100 barrels of oil) you only need 2% margin to trade this amount. At a price of $53.76 along a leverage of 500:1 you can trade 100 barrels of oil with $10.75 USD required margin.
Current price per barrel * Number of barrels in the contract = Total value of the contract
53.76*100=$5376.0
Total value of the contract / leverage = Margin required
$5376.0 / 500 = $10.75
A move in the price of 1 USD equates to 100 USD since you are trading 100 barrels, making it extremely attractive for those interested in trading the asset. Oil’s average daily price range from lowest to highest is $2 USD movement.
Trading CFDs on energy assets, such as crude oil, has become very popular in the last decade since many traders find it very convenient to exchange contracts that have no expiration dates unlike futures contracts.
Crude oil is one of the most actively traded commodities, the two most popularly traded grades of oil are Brent Crude (XBRUSD) and West Texas Intermediate (XTIUSD). Crude oil prices change mostly based on fundamental factors such as production, and demand.
The Organization of the Petroleum Exporting Countries (OPEC) is in charge coordinating and unifying the petroleum policies of its Member Countries and ensuring the stabilization of oil markets in order to secure an efficient, economic and regular supply of petroleum to consumers.
We hope that the information provided in this article was interesting to you and mostly that you can use this information to improve your trading skills. We strive to present this information in a way that is easy for you to digest. If you enjoyed this article make sure to visit our resources page to find more information that can help you become a better trader and test those strategies on a trading account
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Risk Warning: Margin trading involves a high level of risk, and may not be suitable for all investors. You should carefully consider your objectives, financial situation, needs and level of experience before entering into any margined transactions with Baxia Markets, and seek independent advice if necessary. Forex and CFDs are highly leveraged products which mean both gains and losses are magnified. You should only trade in these products if you fully understand the risks involved and can afford losses without adversely affecting your lifestyle (including the risk of losing the entirety of your initial investment). You must assess and consider them carefully before making any decision about using our products or services.
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