Oil Trading Basics

Oil Barrel

The trading of oil changed dramatically after the second world war. Initially the “seven sisters” dominated the global petroleum industry by controlling the whole supply chain from source to consumer. These seven companies allowed for little intervention in the energy markets and prices were set by long term contracts. With the oil crisis in the 1970’s the spot market emerged and oil was freely traded amid producers and consumers as we know it today.

Oil provides the backbone of any developing economy and energy demand depends on global growth. However, disruptions in supply, such as war and other geopolitical events, can have extreme effects on the oil futures market.

Trading oil at easyMarkets® is performed in the same way as trading in currencies. The OIL trader will open, modify and close deals on our platform in the same way they do with an FX trade.

Specifications for trading Oil on our platform

Quote convention: OIL will be quoted with OIL as the base – Example OIL/USD = 118.00 USD per barrel

Expiration date: Commodities and indices are traded as CFDs with easyMarkets and expire at 12:00 GMT. Please note, OIL expiration time is 15:00 GMT. The expiration of each deal is displayed on your trade ticket, open position and on MT4 Market Watch.

easyMarkets® does not rollover expiring deals to the new contract, unless notified beforehand. The client should directly contact easyMarkets one working day before expiry of deal for renewal. Client should note that in the case of renewals, easyMarkets® will not carry the profit or loss to the new deal. Any profit will be credited to your trading account and any loss debited.

easyMarkets also reserves the right not to renew the deal if it so chooses.

If instructed to, as soon as the old deal is automatically closed, a dealer will open a new deal expiring in the new month that follows the expired deal with the same amount and type of the closed deal. The remaining margin on the expired deal will be placed on the new one, unless the client instructs the dealer otherwise. The opening rate of the new deal will be done at the new month’s rate.

Using an OIL/USD deal as an example: at expiry time 12:00 GMT the old contract closing price was at USD35.50 per barrel and the new contract price is trading at $40.50. At expiry, the old deal will be closed automatically at $35.50. Any profit or loss will be reflected in the margin and thus in the free balance. If instructed, the dealer will open a new deal at a price of $40.50 (the price of the new contract at 12:00 GMT), and place an amount equal to the remaining margin on the old deal, unless instructed otherwise.

In order to inquire about expiry date of current contract and difference in prices between the two contracts, please contact your dealer.

Trading hours: From 23:00 GMT until 22:00 GMT, Sunday to Friday with a daily break between 22:00 to 23:00. Outside these hours no opening or closing of deals will be allowed.

Availability: Oil trading is not available in USA and some other regions.

Types of oil trading:

WTI OIL: West Texas Intermediary (WTI) light sweet crude oil is traded on the New York Mercantile Exchange (NYMEX). It is the most popular oil futures contract, regularly quoted as the benchmark for oil prices globally.

BRENT CRUDE: A light, sweet crude oil sourced from the North Sea primarily traded in the London Brent market. It was named after the Brent goose by the Dutch oil company Shell.

GAS OIL: One of the products of crude oil primarily used for heating and power generation. After petrol, this product represents the largest segment extracted from crude oil.

HEATING OIL: Heating oil is a refined product of crude oil. In Europe it is known as Gas Oil and is used especially to heat North American homes.

For more information on oil and other related trading products, go to our blog website, forex.info.

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