How to start oil trading: the complete guide to trading oil markets

Oil is the most heavily traded commodity on the market. It’s bought and sold by speculators, funds and investors, as well as oil producers and refiners who want to hedge their exposure. Discover how to start trading oil – including how the oil market works and what moves its price.

Energy 2

What is oil trading?

Oil trading is the act of buying and selling oil to make a profit – whether this is exchanging the physical commodity or speculating on its market price. The oil market is extremely popular due to the volatility caused by changes in supply and demand.

Learn about oil trading with us

What oil markets can you trade?

There are hundreds of types of crude oil, which are traded all over the world and used as a vital source of energy. When you see ‘oil markets’ in the news or on trading platforms, they’re referring to oil benchmarks, which are certain types of crude oil that are then used to price other – smaller and more independently produced – types of oil.

The two main benchmarks are:

  • West Texas Intermediary (WTI) – this is the main benchmark for oil prices, used all over the world to gauge supply and demand. It’s produced in North America, and its futures are traded on the New York Mercantile Exchange (NYMEX) division of the Chicago Mercantile Exchange (CME)
  • Brent Crude – this oil blend is sweet, light crude oil, first extracted from Brent oil fields in the North Sea. Brent Crude futures trade on the Intercontinental Exchange. It’s the leading benchmark for oil prices across African, European and Middle Eastern crude markets, which account for roughly two-thirds of oil production

Each crude oil has distinctive qualities depending on where it’s made and refined, and so will have a higher or lower market value than that of the benchmark oil based on how close in consistency they are to each other. For example, a heavy crude from Saudi Arabia is cheaper than WTI, as it has a lower percentage of gasoline and diesel when converted.

Although the price of a benchmark will fluctuate, the price of other crude oils will always remain the same in relation to it. So, if the heavy oil is $3 cheaper per barrel than WTI, regardless of how much WTI rises or falls in price, the heavy oil will always be $3 less.

There are other types of oil markets available, such as Gas Oil – also known as petrol or gasoline, which is used primarily for filling cars and agricultural activities – and Heating Oil, which is a petroleum product used to heat homes.

How do oil markets work?

Oil markets work using futures contracts, which enable investors, speculators and businesses to buy and sell barrels of oil for set prices on a set date in the future. Hundreds of millions of futures contracts are traded every day, for benchmark oils such as WTI and Brent, as well as lesser-known crudes.

At the end of the day, a settlement price of the benchmark oils would be announced, which would then be used to calculate the price of other oil contracts.

The oil price at any given moment is calculated from all the buy and sell prices of traders, refiners, funds, and individuals taking a position on crude. These will be influenced by:

  • Supply – global oil supply has fallen every year since 2014 as global oil reserves become depleted and explorations cease to be successful. Declining supply means it will become more difficult to meet global demand, which could lead to a sharp rise in prices. In the short term, any periods of reduced demand could flood the market with supply – although the Organisation of Petroleum Exporting Countries (OPEC) usually intervenes to prevent this 
  • Demand – global oil demand is estimated to reach 98 million barrels a day in 2021, as emerging market economies continue to expand. If demand outstrips supply, the price of oil will rise significantly. The demand for energy sources could hasten the move to alternative fuels, and add further pressure to the oil market

How to trade oil

  1. Create a trading account
  2. Choose whether to trade oil futures, spot prices, or stocks and ETFs
  3. Open your first position
  4. Monitor your trade using technical and fundamental analysis

When you trade oil, you’ll be using derivative products to speculate on the underlying market price – rather than ever buying or selling barrels of oil themselves. There are multiple ways you can trade oil with us, including via futures, spot prices, stocks, and ETFs.

Trading oil futures

Futures contracts are standardised agreements to exchange oil for a set price on an agreed date. At the point of expiry, the contract is either settled – physically or in cash – or is rolled over to the next expiry date.

Futures contracts are used to price oil markets, so when you buy or sell oil via other means – including spot prices and ETFs – you’ll still be exposed to the underlying oil futures.

Learn more about trading futures.

Trading oil spot prices

Spot oil markets represent the price of a barrel if you bought or sold it at that exact moment in time. It is a short-term transaction, where settlement occurs almost instantly.

Our spot prices are based on two sufficiently liquid oil futures contracts – which are usually the two with the nearest expiry dates. These commodity markets are non-expiring, so you’ll get continuous oil prices with no need to roll your position over.

Spot oil is ideal for taking shorter-term positions and enables you to perform deeper levels of technical analysis.

Find out more about our spot commodity markets.

Trading oil stocks and ETFs

You could choose to trade oil indirectly by gaining exposure to the stocks of oil companies – the businesses involved in the exploration, drilling, refining, and sale of oil. Some of the biggest names include Royal Dutch ShellExxon MobilBP, and Total.

Oil stocks are also grouped into exchange traded funds (ETFs) which enable you to trade oil futures or multiple companies from a single position.

Learn more about shares trading.

Trading oil CFDs and spread bets

You can trade oil futures, spot prices, stocks, and ETFs using CFDs and spread bets. You won’t be required to take delivery of an asset when the contract matures and can choose whether to roll over your futures positions.

Spread bets and CFDs can be more cost effective than buying actual futures contracts, as you can open a position for just a fraction of the actual cost – known as leveraging your position. Leverage can magnify your profits, but it can also magnify your risk so it’s important to manage your risk appropriately.

Learn more about how to trade oil with a Spread Betting or CFD Trading account.

When does the oil market open?

Most oil markets are available to trade nearly 24 hours a day. But trading breaks make it important to know exactly when each oil market opens and closes so you know when you’ll be able to create and modify trades.

Our oil trading hours run from Monday to Friday as follows:

Oil spot trading hours (GMT)

Oil futures trading hours (GMT)

US Crude

5:00 – 21:15

23:00 – 22:00

UK Crude

1:00 to 23:00

23:00 – 22:00

Heating Oil

N/A

23:00 – 22:00

Gas Oil

N/A

23:00 – 22:00


More from Oil

From time to time, StoneX Financial Pty Ltd (“we”, “our”) website may contain links to other sites and/or resources provided by third parties. These links and/or resources are provided for your information only and we have no control over the contents of those materials, and in no way endorse their content. Any analysis, opinion, commentary or research-based material on our website is for information and educational purposes only and is not, in any circumstances, intended to be an offer, recommendation or solicitation to buy or sell. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. No representation or warranty is made, express or implied, that the materials on our website are complete or accurate. We are not under any obligation to update any such material.

As such, we (and/or our associated companies) will not be responsible or liable for any loss or damage incurred by you or any third party arising out of, or in connection with, any use of the information on our website (other than with regards to any duty or liability that we are unable to limit or exclude by law or under the applicable regulatory system) and any such liability is hereby expressly disclaimed.