Crude Oil Trading

Trading crude oil can be very difficult and there are many factors that affect its price.

Oil is currently drifting higher day by day. Although there has been a recent pull back in line with equity markets from the highs, we are still far higher now than we were 12 months ago.

For all of the talk about variation from dependence on oil, the fact remains that a huge percentage of our energy usage still relies on crude oil. While there are other alternatives to petrol and diesel we are stuck with the historical infrastructure built around these, as anyone who has searched for an LPG or bio-fuel garage will testify.

The daily markets are providing some interesting opportunities for those who are able to buy and sell crude oil. For the Nymex US Oil futures contract, a recent attempted rally ran into quicksand far faster than the bulls might have expected.

The moves higher are still very aggressive but we are now running into general-drifting-lower periods when not much is going on. This is in stark contrast to earlier trading sessions which saw continued upside pressure throughout.

Whisper it quietly but there is a certain amount of trepidation. If we cannot get back onto the front foot soon, the current over-supply of oil, which the markets have ignored for some time, might outweigh the recent concerns about ‘future demand outpacing production’.

Towards the end of 2009 oil had something of a gravitational pull to the $80 per barrel level. Having said that there was, and still is, a degree of volatility around the weekly Oil inventories (due out on Wednesdays 15.30 at local London time and 09.30 local New York time).

Many traders seem to be flattening positions out before the weekly inventories and they are only taking a view in the aftermath.

If I am trading the oil markets, be it US Oil (WTI) and/or UK Oil (Brent) then I prefer to trade my short term positions through a spread betting account.

There are a number of Financial Services Authority regulated companies that offer thousands of international markets including crude oil, currencies, stocks and shares. Spread betting firms, like FinancialSpreads.com and IG Index offer the normal benefits of spread betting including; tax free trading*, trading outside market hours, no brokers fees and no commissions.

Be aware though, spread bets do carry a high level of risk to your capital and you can lose more than your initial stake. You should only speculate with funds you can afford to lose. Before trading, ensure that spread betting matches your investment objectives and familiarise yourself with the risks involved. If necessary, seek independent advice.

* According to current UK and Irish tax law, this may change or differ depending on your personal circumstances.