Best Oil Trading Forex Brokers 2023
Oil or crude oil is naturally found in unrefined petroleum products, which is one of the top contracts for difference (CFDs) in the trading world. Oil trading broker provide services to the traders to trade such CFDs. However, CFD trading might not be legal in a few countries such as the USA. Hence, you will need to know your local laws and check if you can trade oil CFDs. So, if your country allows you to trade crude oil CFD, you can trade with online crude oil trading brokers. You will need the best trading platform for crude oil, which you can find by yourself, or pick any broker from our recommended list provided in this article.
Apart from the recommendation on the best broker to trade oil, this article will also take you through each detail of CFDs on crude oil. Read on to mine it.
Crude oil CFD Explanation
When it comes to online CFD trading, you will find numerous products to trade, such as indices, forex, commodities, etc. But, to make a substantial decision on any product, you must understand the product you are aiming to invest in.
Since you are in this article, you are surely interested in oil CFDs. It is a natural resource that is extracted through drilling or mining from the earth. It is usually found with other natural resources such as saline water and natural gas. However, the crude oil is refined from other elements transformed to plastic and petroleum sometimes.
Nevertheless, crude oil resources are extremely limited as it has been in the world for millions of years, and we have been using it since ancient times. It was created when the extra prehistoric algae as well as plankton fell in the ocean and reached underneath and mixed with mud, layers of sediment. The crude oil was not created overnight. Instead, it took millions of years until the aforementioned elements turned into liquid. Hence, it is known as nonrenewable energy. Perhaps the creation of crude oil is a lengthy process, and the supply is running out.
Crude oil is extracted in several parts of the world. However, there are currently two main sources that you need to know if you want to trade oil CFDs.
Best Oil Trading Forex Brokers List
North Sea Brent Crude
Brent crude is available in Europe, Middle East, and Africa. Usually, Brent crude is extracted from 15 different sources found in the North Sea. Currently, four oil fields are there, Brent, Oseberg, the Forties, and Ekofisk.
Usually, Brent crude oil is heavy by nature which has high gravity alongside the impurities. And this is the reason it takes huge effort and time to refine and process as an end product to use it. As a result, it has a high price. However, Brent crude is one of the top benchmarks in oil trading, and around 66% of the oil contracts use Brent crude for the price reference. But, the cost for international transport of this oil is lower as it is produced in the sea.
“Brent crude is primarily used in the Intercontinental Exchange (ICE).”
West Texas Intermediate (WTI)
WTI crude oil is usually extracted from wells located all over the USA. It is sent to Cushing and Oklahoma with the pipeline. Nevertheless, WTI crude oil is high quality as it is “lighter” and “sweeter.” But it takes more effort than Brent to process and refine and make it usable.
WTI crude oil is located in the land, and the distribution channels are challenging. As a result, it needs a high transportation cost. That is why distributing to the overseas market is costly, and WTI is used in the American local markets. That being said, Brent crude has wide access to the international market.
CFDs on WTI crude oil are usually traded in New York Mercantile Exchange (NYMEX). But you will need to have an idea of both Brent and WTI as these oils’ prices move in a different direction. So, it is necessary for the traders to know the term “Brent-WTI spread” for online crude oil trading. It represents the price difference between the two crude oils.
For the online investment business, crude oil has a reputation as black gold. You can primarily trade crude oil through the old-fashioned by buying and selling it. But this will require handing the product physically, which will incur high maintenance costs.
Hence, trading CFDs on WTI crude oil or Brent online can be a good solution. For the oil CFDs, futures, forwards, spot contracts, options contracts, and NDFs are used. Online oil trading is highly expensive and requires a high margin, while there is crude oil lowest margin broker too. But, a retail investor can trade oil CFDs via the online crude oil trading brokers easily with the limited fund. Traders can easily make a profit from the oil pricing differences.
Crude Oil Trading Online
There are many options for online trading, but some options are highly risky, and some have a low risk. However, risky investment options can get you high profit, and low-risk options get you a small profit. Therefore, traders tend to invest in risky and limited products. Oil CFDs are risky yet high-yield products.
So, a lot of traders jump for the crude oil CFD trading with the hope of making some quick bucks. But it is risky, and trading without the best trading platform for crude oil may lead to a loss.
However, trading crude oil online doesn’t mean buying and sell barrels of oil. It works like other online investment products, and you don’t own the oil physically.
Trading Crude Oil CFDs on Forex
Many forex brokers offer CFD trading for oils and work as oil trading broker. Although it is a different market, the trading process is the same as the forex. Hence, trading crude oil can be processed in two ways.
- It can be traded as spot contracts through immediate settlement and delivery.
- The second way is trading as futures contracts, which ensure settlement and delivery in three months. But, keep in mind that the pricing for the crude oil CFD contracts is normally settled right away.
However, trading crude oil via futures and options is expensive. And the margin requirement is high for both cases. As a result, many low budgets retail traders do not prefer about oil trading through the futures and options. But retail traders have another way to trade crude oils CFDs. They can access it via assets in the form of a contract for difference without having any physical exchange.
Oil prices fluctuate regularly due to political and economic factors. Besides, the production level also works as a catalyst for the price change.
Usually, the US crude oil price is lower than the Brent crude. It is because the US crude is a light product and needs less refining. On the other hand, Brent needs a well-built refining process as it is heavier crude oil with a significant amount of impurities.
Choosing the Online Crude Oil Trading Brokers
Your success in crude oil trading depends mostly on the best broker for crude oil trading and your trading strategy. Also brokers put a great impact on your oil trading. So, you have to choose the broker carefully. Usually, you need to check three factors while choosing the best crude oil brokers their regulations, types of the trading platform, and software.
There are a lot of online crude oil trading brokers. You will find contracts for both US crude and Bret crude. So, whichever you aim to trade, make sure the broker has permission from the regulators. Hence, it is important to verify the broker with the regulatory body.
Some regulations may impose margin requirements for the oil trading brokers. For example, some regulations may impose leverage and margin requirements while trading the crude oil CFDs. The Commodities and Futures Trading Commission (CFTC) brought out a new rule for options and futures trading, and the maximum leverage needed was 1:20. Eventually, this rule requires a huge capital demand for the retail brokerage.
However, the regulated best broker for oil trading from Australia, Europe, and the UK don’t have such rules. Therefore, the best broker to trade oil from these countries attracts more traders for oil contracts.
Crude Oil Trading Platforms
There are numerous platforms available for trading forex and other relevant assets. But there are a few platforms that allow crude oil trading for retail traders. Those platforms are MT4, MT5, cTrader, ActTrader, and JForex.
So, you have to know the details about those platforms and the best broker for crude oil trading offers of those platforms. Usually, the crude oils are paired with the US dollar. But the contracts are also available for the USA and UK crude.
However, the MT4 platform is widely known and used by all traders. So, if your intended broker offers MetaTrader 4 as a crude oil trading platform, you can certainly go for it.
In the online trading world, there are thousands of automated trading software available which can work on your crude oil trading automation as well as the commodity market. Besides, you can also customize the software according to your requirements. While choosing the best trading platform for crude oil, make sure you check the accessibility of the software offered by the best broker for oil trading. So, you will have to know the programming language of the software to make a compatible trading environment.
Best Online Crude Oil Trading Brokers: Account Types
Usually, oil is traded in upwards and downwards directions with the accessibility of short orders. Crude oil is highly volatile and has an unpredicted price movement. So, it is essential that the traders should understand the offered account types and choose according to their requirements. You will find the following common account types available with the best oil trading brokers.
This newbie level account in online crude oil trading brokers has some restrictions for the contract sizes. The aim of the micro crude oil CFD account is to minimize the risk. “Traders can trade through the micro-lots in micro accounts.”
It can be named as a standard account too. This is mainly for the traders who have some sort of experience in oil trading or just competed trading with the micro account. However, traders don’t need to have large capital to trade via standard accounts. Besides, mini lots are also available in this account type. For the standard lot, it is capped at 1 standard lot.
This type of oil trading account is for traders who have a lot of experience in oil trading and have a large capital. VIP accounts also come with some special bonuses.
Commissions and Spreads
A retail trading platform such as MT4, MT5 imposes both commissions and spreads. Traders usually need to pay commission on entry and exits. So, oil broker commission rates are an important factor determining the profit.
Oil Trading Broker: Margins and Leverage
Margin is a certain percentage a trader requires to take a position. For instance, if the required margin is 5% for a broker, the $1000 position will need $50 capital.
Leverage signifies the ratio for the margin requirements. Usually, the regular brokerage firms offer 1:500 leverage, which means a $1000 trade needs $1 in the margin capital. However, risk management stays critical. For a maximum outcome, you will need to choose the best margin broker for crude oil trading.
CFD Trading Oil in the USA
US traders can trade crude oil on NYMEX, which gives access to both US crude oil and Brent. However, the one contract in NYMEX is equal to 1,000 barrels, which is an option for large portfolios. Besides, crude oil futures contracts by CME group offer a reduced portfolio, which has 500 barrels of oil per contract.
Crude Oil Trading Benefits
Crude oil trading is not as popular as forex trading, but you will get lots of benefits from oil trading. Let’s see the benefits you will get.
The demand for crude oil is limitless. Besides, it is refined into many products such as plastics or petroleum. Hence, a number of industries need crude oil for working purposes. So, crude oil is a fast-moving market, and you can liquid your trade easily.
Hedging to Currency Depreciation
Usually, crude oil is quoted in US dollars. So, it is evident that crude oil price moves against the USD and also other correlated currencies that are also quoted in USD. So, if you are seeking an alternative to hedge for currency depreciation, you can easily work with crude oil.
High Price Fluctuations
Crude oil price is determined by different factors such as demand, supply, political, economic condition, etc. Hence, it is difficult to predict the oil CFD price. To forecast the oil price, experts need to have great skills with access to different tools.
Although it is an extremely volatile market, experienced traders can get some benefits out of it. Also get a massive amount of returns.
Diversifying the Portfolio
Diversifying the portfolio lets an investor gain all the possible revenues by avoiding all the potential risks even if the market moves against you. So, if you are already a forex trader or metal trader, you may now proceed to oil trading and diversify your trading portfolio.
Why is Trading Crude Oil Important?
You might have come across the news about how oil has been an important element in the world economy. Further, this liquid natural element seems essential for some countries to take their economic and political decisions. It is because crude oil has a significant value in determining the international goods price. Moreover, crude oil also put an impact on commercial and residential use.
Steps in Investing Crude Oil on Oil Trading Broker
There are many catalysts that can affect Crude oil prices. Hence, you will need to consider some criteria before jumping into crude oil CFD trading.
First of all, plan your oil trading strategy according to your investment and manage your money properly. The strategy includes entry and exit trades. It also includes deciding the objective of the trade. However, if you don’t have a concrete plan, you may source the strategy from other traders, which is called copy trading.
Test the Plan
Once your plan is ready, you can go for testing your plan. You can open a demo account with any brokerage firm and implement your trading strategy. If the plan works perfectly on a demo account, you may go for live trading.
Pick Best Crude Oil Brokers
Let’s assume your demo trading plan is ready, and you can now pick the broker according to the requirements. They open the account with the desired broker. However, if you are confused about which broker to choose, you may pick any broker from the list we have provided on this page.
So, you have completed all the steps, such as planning, testing, and selecting the broker. Now you are ready to start the trading. However, you will need to deposit money before you are eligible to start trading.
If you are determined about trading oil CFDs, there is no alternative to select the oil trading broker for your convenience. However, you will need to ensure that you choose the best forex broker for oil trading. Choosing the right broker for crude oil CFDs is not an easy task, but this article will certainly help you to choose the perfect broker.
But, if you are still confused about choosing the right broker for your oil trading, you may try picking any of the brokers from our list as we listed them after extensive research.