Invest in Oil market on SuperForex

Trading crude oil through the SuperForex platform.

If volatility is important to traders, then every trader should pay attention to crude oil.

You can test the trading skills on WTI and Brent crude oil CFDs, and complete fast execution through the low spreads of the trusted SuperForex.

Crude oil is an unrefined petroleum product. The original form of crude oil is a dark black liquid, extracted from the ground or ocean, and then refined into more useful products such as gasoline, diesel or other petrochemical products.

The crude oil called “black gold” has many concerns. Since the early 1900s, oil has been suppressing coal demand and has been a catalyst for geopolitical tensions and wars for decades; although oil as a transportation fuel may be threatened by renewable energy in the future, it is still very popular today, And is a key component of the global transportation industry.

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Oil prices and inflation are driven together

If oil demand rises, so will the price of rigs to gasoline pumps, and consumers will feel pressure because their disposable income will decrease. Conversely, lower oil prices are considered deflation (or deflation if the inflation rate slows and is not negative). Therefore, traders, analysts and economic planners will pay close attention to oil prices to help evaluate central bank policies by measuring the power of inflation.

The two most popular markets for oil traders are WTI and Brent crude oil. You can trade in these two markets through the MT4 of the SuperForex platform.

1. West Texas Intermediate Base Crude Oil (WTI):

WTI is a grade of crude oil from US oil fields. Because of its low sulfur content and low density, it is considered “light, low-sulfur” crude oil, which can be converted into gasoline and diesel fuel and is the main benchmark for petroleum pricing. Traded on the New York Mercantile Exchange (NYMEX), it is considered the most liquid oil futures contract, usually trading more than 1 million contracts per day.

2. Brent crude oil:

Brent crude oil is another kind of crude oil, which is mainly extracted from the North Sea oil field. Despite its superior location, Brent crude oil is also traded in US dollars, but is settled in cash, rather than in physical units like WTI. . Brent crude oil traded on the London Intercontinental Exchange (ICE) is used as a benchmark to price approximately two-thirds of the world’s oil prices. Although Brent crude oil is also considered a “light and sweet” crude oil, its sulfur content is slightly higher, which means that WTI is the more advantageous of the two.

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What drives the price of Oil market?

Oil and market volatility are closely linked. Although oil prices hovered between US$10 and US$30 per barrel from 1986 to 1999, the price rose to a high of US$147 in 2008, and it has shown that it has remained at a certain level within a few days, months, or even years. Under the circumstances, the ability to quickly rise or fall.

Although crude oil is driven by many fundamentals, here we cover some of the fundamentals that traders and investors may notice.

1. Supply and demand:

Like all commodities, oil prices are sensitive to supply and demand, and they can have varying degrees of impact in all time frames.

For example, with the acceleration of global economic growth, after the Nasdaq bubble in 1999, increasing demand helped oil prices rise by more than 1,200%. If growth is rapid, the supply chain will remain busy as consumption increases, and oil is needed to drive transportation from miners, producers to distributors and retailers.

Of course, the reverse is also true. During a recession, insufficient consumption can stifle demand and drag down oil prices. A recent example is the global lockdown caused by the covid-19 pandemic. Oil prices plummeted to zero and futures prices fell to negative values. Only recently, thinking about this incident is almost unthinkable.

As for supply shocks, if the losses are large enough to disrupt supply, accidental attacks on oil fields may cause oil prices to soar. The most recent example is in September, when a drone attacked a Saudi oil facility over the weekend, causing WTI to gap 12% at the opening of the market on Monday.

2. Organization of Petroleum Exporting Countries (OPEC):

OPEC, commonly referred to as an oil cartel, was established in 1960 and originally composed of 5 members; Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela. Over time, they have expanded to 13 members, aiming to control oil prices by changing the oil production of the members.

By cutting production, they effectively restricted supply to support or raise oil prices. By increasing production, OPEC aims to reduce prices or eliminate the heat of price increases.

It is estimated that OPEC controls about 75% of the world’s crude oil reserves and about 42% of total crude oil production, so traders will focus on the meetings where they announce their actions.

3. Economic data:

Oil traders will pay close attention to macroeconomic data, such as GDP, industrial production, CPI and PMI surveys, to pay close attention to global growth and potential consumption (demand).

Of course, there are many oil-specific indicators that traders pay attention to. We will briefly explain below:

  • American Petroleum Institute (API): They publish a large number of data sets every week to help traders assess demand and supply; the most popular one is “crude oil inventory”, which focuses on the amount of oil stored. Other examples include gasoline inventories, crude oil imports, Cushing numbers, and crude oil operations.
  • International Energy Agency (IEA): Representing the oil and gas industry in the United States, they publish weekly and monthly statistical bulletins (WSB and MSB) to show the demand and supply of transportation fuel (among others).
  • Number of Baker Hughes Rigs: This data set shows the number of oil rigs actively drilling for oil. The North American version is released weekly, and the international version is released monthly.
  • Commitment of Traders Report (COTR): A weekly report showing the market positioning of the futures market. Oil traders look at the positioning (net long or short) of oil by hedge funds, brokers and professional traders.

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4. Geopolitics:

Oil prices and geopolitics go hand in hand; as Saudi Arabia is still the world’s largest oil exporter, tensions in the Middle East often affect the crude oil market. In recent months, we have also seen the resurface of tensions with Iran, neighboring countries, and the United States, which has led to renewed fluctuations in oil prices. Due to the fact that the shale industry has now become the next oil exporter in the United States, we have reason to speculate that geopolitics will not soon affect oil volatility.

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Why people invest in Oil market online?

Trading WTI and Brent crude oil CFDs in MT4 on the SuperForex platform can avoid some pitfalls related to futures trading. Since you have not signed a formal contract, you do not need to worry about the expiration or renewal of the contract, allowing traders to freely speculate on the market direction instead of physical delivery.

Speculation in bull and bear markets:
Speculation in bullish and bearish markets, long and short trading in the underlying market requires more risk; futures contracts limit the number of traders at a time, and can reach the so-called “up limit” or ” Limit down”, which prevents new traders from entering the market or open traders from entering their trades.
Margin trading:
SuperForex provides oil CFDs with high leverage up to 100:1, and investors’ margin requirements are kept at a low level. This allows investors to increase market trading volume with smaller collateral and keep traders away The risk of margin call.
Avoid contract expiration and rollover:
With CFDs, you can focus on the market direction without having to calculate rollover costs or when the futures contract expires.

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How to hedge with oil futures, the ETF of the Stock Trader Group?

Some investors like to hedge their positions. A fully hedged position means that your transaction value is equal to the original position, but in the opposite direction. If they want to temporarily reduce the transaction risk, this will lock in profits or limit losses for them.

If investors are optimistic about WTI in the next few weeks, but worry that increased geopolitical tensions may suppress oil prices over the weekend, they can hedge their positions over the weekend.

If investors trade in the futures market, they can hedge the position with only a fraction of the margin required for futures trading.

If traders short a batch of oil stocks, they can hedge their bearish portfolio by opening long WTI or Brent CFD to lock in profits and protect themselves from rising stocks.

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Why choose SuperForex to invest in Oil markets?

Fast execution:
If you can guarantee that you can enter or close the transaction without any delay, then the small spreads and low commissions will not make much sense. SuperForex provides fast execution services, so that both discretionary traders and expert advisors (EA) are very attractive to trading oil.
High leverage:
The leverage of SuperForex’s oil CFDs is as high as 100:1, and the margin requirements are very low, which makes oil trading easier.
No handling fee (Pure Spread Account):
There is no commission on the pure spread account, and you only need to pay the spread to enter the transaction.
Low commission (original zero account):
To trade a complete oil contract, each complete contract (1,000 barrels) only requires a $4 commission. The original zero account also comes with original spreads, making it an ideal choice for traders.

Invest in Oil market with SuperForex