CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 63% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the High risk of losing your money.

What Affects the Price of Oil?

  • Oil Supply: Oil is a resource that is not located in every country, and hence the production of oil is concentrated. This gives these oil producing countries and oil associations (such as OPEC) more power to control their supply and impact price
  • Oil Demand: Demand for oil grows when the global economy is performing well, because consumers are buying more products, companies are shipping and transporting more goods (due to higher demand), companies are investing more (to create enough capacity), and consumers are travelling more for business and leisure. A weakening global economy has the opposite effect, and decreases demand for oil.
  • Geopolitics: with just five countries (United States, Russia, Saudi Arabia, Iraq, Canada) responsible for nearly half the world's total oil supply tension in one of these nations can cause significant issues making the prices really violatile. For instance, a war or conflict in an oil-producing region could threaten inventories, production or refinement facilities, which could then cause a spike in the oil price.

How to Calculate an Initial Margin Requirement?

The calculation of required margin for Crude Oil CFD is performed as follows:

Margin: Trade size in micro units × Ask price × Margin required

* A unit is expressed in US$

* Margin calculation of Crude Oil CFDs has nothing to do with the leverage setting in your account

Take XTIUSD as an example:

The basic platform settings for XTIUSD imply that the contract volume of 1 standard lot is 1000 (1000 barrel) and the required margin is 1%.

Assuming that the current XAUUSD price is 25.88 / 25.85, the required margin for buying 1 lot of XTIUSD would be: 1000 × 25.85 × 0.01 = 258.5 US$

How to Calculate a Profit and Loss in Crude Oil Trading?

The formula for calculating the profit and loss of a Crude Oil CFD is:

P&L = Number of lots × Contract size (trade size in micro-lots) × Pip movement

Units are expressed in USD

Pip movement of the BUY orders = Ask price at closing time — Bid price at opening time

Pip movement of the SELL orders = Ask price at opening time — Bid price at the time of closing a position

Let's take XTIUSD as an example:

Assume that the platform's current XTIUSD quote is 25.88 / 25.85. Lilly buys 1 lot of XTIUSD, and Tony is going to sell 1 lot of the same asset.

One week later the exchange rate of XTIUSD escalated to 23.79 / 23.75. So at this time profit and loss of our investors is:

Lilly's P&L = 1 × 1000 × (23.75 - 25.88) = -2130 USD

Tony's P&L = 1 × 1000 × (25.85 - 23.79) = 2060 USD

Spot Prices vs. Futures Prices: What's the Difference?

Spot price of oil is the current price of oil - that is the price that you can buy or sell oil 'on the spot' (ie: Now). Spot price of oil (or other commodities) is also a ‘measure’ of the current demand and supply of oil at the moment.

The future price of oil (or other commodities) is the price 'in the future' (or x days from now) that you can buy oil - either by futures or forward contract.

From the trader's perspective, the main differences are:

1. Swap charges are different. There is no overnight spread for crude oil futures, while an overnight spread for crude oil is charged.

2. Rollover costs also differ. Futures oil has a monthly rollover and there is an automatically added rollover fee. Spot crude oil does not need rollover, and so it comes with no fees of that type.

3. Trading hours are not the same either.

Crude Oil Comparison: Brent vs WTI

While both Brent and WTI crude oil are popular instruments for trading, there are five key differences between the two oils:

Extraction location: WTI crude oil is extracted and produced in the US - mainly in Texas, North Dakota and Louisiana. Meanwhile, Brent crude is largely extracted from the oil fields in the North Sea.

Geopolitical difference: Oil prices are often influenced by political activity, which can mean the political situation in the areas where oil is extracted can influence prices and oil trading activity. Today, this is more relevant for OPEC oil than Brent or WTI.

Composition and content: Oil composition also influences the price of WTI and Brent, mainly API (American Petroleum Institute) gravity, which is a measure of how heavy the oil is compared with water, and sulfur content. WTI's sulfur content is 0.24%, versus Brent's 0.37%

Oil trading options: Brent and WTI also have different trading options, including futures contracts and CFDs. Futures contracts for each oil are managed on different exchanges (WTI via the New York Mercantile Exchange and Brent via the Intercontinental Exchange), while many CFD brokers will offer the option to trade both via the same broker and platform.

Prices: Theoretically, WTI should trade at a premium to Brent crude, however, this isn't always the case. The reason for this is because there are a range of factors that influence the price of oil, not just the quality of the oil itself. One is supply and demand, for example, when supply increased during the Shale Revolution in the early 2000s, the price of oil went down.

  • Swap Fee

    Swap fees of different instruments are different

  • Trading Hours

    View trading hours of all instruments and holiday arragement of the platform

  • Spread

    The spread are floating, apply for Raw Spread Account to get the best trading environment

  • Rollover Fee

    Rollover is a cost which designs to compensate the prices changes when extend the trading contract to the new one