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Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.
Spread bets and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading spread bets and CFDs with this provider. You should consider whether you understand how spread bets and CFDs work, and whether you can afford to take the high risk of losing your money.

Commodities trading

What are oil CFDs and how do you trade them?

Trading oil CFDs can give you direct market access to one of the world’s popular volatile commodities. Discover what oil CFDs are and how to trade them with us.

Call 0800 195 3100 or email newaccounts.uk@ig.com to talk about opening an account.

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Get info fast via our instant help and support portal. Available for account queries, ProRealTime, product info and more.

Visit help and support for more information.

Get info fast via our instant help and support portal. Available for account queries, ProRealTime, product info and more.

Visit help and support for more information.

Call 0800 409 6789 or email helpdesk.uk@ig.com if you have any questions about trading or investing. We're available 24/7 between 8am Saturday and 10pm Friday.

Contact us 0800 409 6789

Call 0800 195 3100 or email newaccounts.uk@ig.com to talk about opening an account.

Contact us 0800 195 3100

Get info fast via our instant help and support portal. Available for account queries, ProRealTime, product info and more.

Visit help and support for more information.

Get info fast via our instant help and support portal. Available for account queries, ProRealTime, product info and more.

Visit help and support for more information.

Call 0800 409 6789 or email helpdesk.uk@ig.com if you have any questions about trading or investing. We're available 24/7 between 8am Saturday and 10pm Friday.

Contact us 0800 409 6789

What are oil CFDs?

Oil CFDs are contracts used to exchange the difference in value of the oil price between the point at which the contract is opened to when it’s closed. Trading oil CFDs will enable you to speculate on both the rise and fall of the underlying asset’s price movement without taking ownership of it.

CFDs are leveraged derivatives, which means you’ll get exposure to the full value of the underlying oil market by only paying a deposit – called margin. For instance, with leverage, if you wanted to open a position worth £1000, you’d only need to put down £100, which is equivalent to a 10% margin.

Essentials of trading oil CFDs

Oil CFDs are popular among individuals who want to trade oil markets without having to buy and own physical barrels of the commodity. You can go long (‘buy’) or short (‘sell’) on the rise and fall of the oil markets.

You’ll make profits if the markets favour the direction of your trade, however, you’ll make a loss if the markets turn against you. Oil CFDs are also a preferred option for you if you’re looking to make short-term trades.
You can trade oil CFDs on our award-winning platform at an average execution speed of 0.014 seconds.1

1. All oil CFDs are traded using leverage

You can trade oil using leveraged derivatives like CFDs, which enable you to speculate on the oil market price movement without taking ownership of the underlying asset.

When trading oil CFDs using leverage and you’d like to open a position, you'll be expected to pay an initial deposit that’s a percentage of the full value of the underlying market. Note that leverage may magnify your profits, but it’ll also result in your losses exceeding the initial margin.

It's important to manage your risk carefully and to ensure you’re not staking more than you’re willing to lose.

Graphic showing how leveraged products like CFDs work when trading oil markets. A 10% margin equal to £100 will be required to open a position to get full exposure to an underlying asset valued at £1000.
Graphic showing how leveraged products like CFDs work when trading oil markets. A 10% margin equal to £100 will be required to open a position to get full exposure to an underlying asset valued at £1000.

2. You can go long or short with oil CFDs

When trading oil CFDs you’ll go long (‘buy’) if you think the market’s oil price movement will rise and go short (‘sell’) if you believe it’ll fall. This can be done at just a click of a button when you trade CFDs on our award-winning platform.1

3. You can hedge with oil CFDs

Oil CFDs can be used for hedging to reduce the risk that comes with any losses against profits for your capital gains tax liabilities. When hedging, you might decide to open two positions that directly offset each other, which means when the one makes a loss or gain it offsets the change in value of the other.

CFDs are free from stamp duty, but you may pay capital gains on your profits.2 Note that when hedging you’ll incur costs, be sure to factor these into your hedge calculations and projections.

Graphic showing how a loss to your initial position and a gain when hedging can help reduce risk or neutralise exposure when trading oil CFDs.
Graphic showing how a loss to your initial position and a gain when hedging can help reduce risk or neutralise exposure when trading oil CFDs.

4. Trading oil CFDs vs other alternatives

CFD trading is one way to get exposure to oil using leverage. Spread betting on oil is the other main alternative.

Spread betting and CFD trading differ in the way they’re taxed. Spread bets are free from capital gains tax, while profits made from CFDs can be offset against losses for tax purposes. You don't pay stamp duty with either product since you won’t be taking ownership of the underlying oil markets.2

Note that leveraged products are complex, it’s important that you understand how they work before trading them and if you can afford to lose your money.

If you'd rather not trade with leverage, you opt to buy and own oil stocks or exchange-traded funds through share dealing. With us, you can buy and hold oil stocks until they appreciate then sell them at a profit. Since share dealing doesn’t use leverage, you’ll be liable to pay the full value of your position upfront.

5. Oil CFDs: undated (spot) vs futures vs options

Most people trade oil CFDs using the spot market – sometimes called the undated or cash market. The spot market uses the real-time trading oil prices with lower spreads, making it popular among day traders.

Oil futures can be kept open for longer because they don’t have overnight fees. Oil futures are financial contracts in which a buyer and a seller agree to trade a specified number of barrels of oil at a fixed price set for a future date However, remember that they have larger spreads.

Oil options give you the right to buy or sell the market before the commodity reaches its expiry on a specific date in the future. With options, you won’t be obligated to buy or sell the oil market, so if it moves against you, you’d decide to pay only the initial margin you used to open the position.

How to trade oil CFDs

  1. Fill in a simple form
    We’ll ask you about your trading knowledge to ensure you've got the best experience when trading CFDs with us.
  2. Get instant verification
    We’ll verify your identity almost immediately.
  3. Fund and start trading
    Deposit funds into your CFD account. You can withdraw it whenever you want to.

If you need to build more confidence in your trading skills, open a free demo account with us. You can practise in a risk-free environment using £10,000 in virtual funds.

1. Learn all about CFDs and oil trading

Oil trading using CFDs involves speculating on the rise and fall of the market price of the underlying asset.

To learn more about how to trade oil via CFDs, enrol for a free course on IG Academy.

Applying for a live account takes just minutes. You’ll fill in an online form and once the application is complete, you’ll receive a notification when it’s accepted. Note that there’s no obligation to fund your account once opened, and you can wait until you’re ready to place your first trade.

Video poster image

2. Open and fund your live CFD trading account

We offer over-the-counter trading for oil markets on the UK’s award-winning platform using CFDs on oil spot markets, oil futures and oil options.1 When you open a CFD account with us, there’s no minimum deposit.
You also make withdrawals fast and at no cost to you.

The deep liquidity on our platform offers fast execution with orders being filled on average at 0.014 seconds. You’ll also receive support 24/7 per week by telephone, email and Twitter.

3. Choose the oil market you want to trade

There are two dominant oil markets for you to trade – Brent Crude and West Texas Intermediary (WTI) also known as US Crude. Brent crude is extracted from oil fields in Europe’s North Sea, while WTI is mined in North America.

Brent crude is the benchmark when trading oil contracts, futures and derivatives at an international level. While in North America WTI is used as a benchmark.

The price difference between the oil markets are based on the commodities’ varying properties. Both Brent crude and US crude are light in nature and can be easily refined and processed by petrol manufacturers.

Live oil and oil-linked prices

4. Decide whether you want to trade undated (spot), futures or options

When you trade the oil markets you have a choice to either trade CFDs on the oil spot price, futures or options. When trading CFDs on the oil spot market you would need to pay for overnight funding. This can be avoided by opening longer-term positions on the underlying oil market by trading futures or options.

5. Open your first CFD trade on oil

You can open your first CFD trade on oil by clicking the commodities section in the top left toolbar of our trading platform. This will display a list of financial instruments in the energies sector. You can then choose the oil market you’d like to trade.

Once this is done, open the deal ticket then buy or sell your oil market of choice. Go long if you believe the oil market price will increase and go short if you think it’ll fall.

IG trading dashboard showing various oil markets that can be traded and a Brent crude oil price chart over a six-month period with a deal ticket showing the oil market sell and buy price.
IG trading dashboard showing various oil markets that can be traded and a Brent crude oil price chart over a six-month period with a deal ticket showing the oil market sell and buy price.

You can set the size of the position you'd like to place on your deal ticket. This will calculate the amount you must pay for the initial margin so you can get exposure to the underlying oil market.

With us, you’ll get trading alerts when the oil market price moves some points above or below the level you’ve set. Note that despite setting these alerts, it remains your main responsibility to monitor your position. It’s important to also use our tools to manage your risk carefully.

To gain access to a list of markets you can get ‘buy’ and ‘sell’ suggestions from our trading signals by clicking on ‘signals’ in the bottom left toolbar of our platform. These suggestions are based on emerging chart patterns and key levels that’ve been met.3

Remember not to solely rely on third-party generated chart patterns on our platform to make your trading decisions, conduct your own due diligence using technical and fundamental analysis.

6. Monitor your position

Once you've opened your position using your CFD trading account, you can set your signals and alerts, and monitor your position Our award-winning platform will also enable you to see the running profits and profits made on your open position.1

Screenshot of IG platform showing a price chart for the Brent crude oil market and a deal ticket to the left-hand side of it.
Screenshot of IG platform showing a price chart for the Brent crude oil market and a deal ticket to the left-hand side of it.

What affects the price of oil?

The demand and supply of oil, as well as various macroeconomic trends, tend to affect the oil market prices. Here are some examples of what affects the price of oil:

  • Controlling the global oil supply. Only five countries produce about half of the world’s oil in total,which increases their power and sovereignty to control the global oil supply. This directly impacts the oil price since the handful of countries can manipulate it
  • Driving global oil demand through growing economies. Positive performance in global economies increase oil demand. When global economies grow exponentially, it increases the oil price. However, weakening global economies decrease oil demand and its price
  • Geopolitics at play. When war or conflict erupts in oil-producing regions, this impacts its supply. This, in turn, increases volatility of oil and its price within the market

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1 Best trading platform as awarded at the ADVFN International Financial Awards 2021. Best trading app as awarded at the ADVFN International Financial Awards 2021.
2 Tax laws are subject to change and depend on individual circumstances. Tax law may differ in a jurisdiction other than the UK.
3 Our signal service does not constitute and shouldn’t be regarded as investment advice. We provide an execution-only service. You act on signals entirely at your own risk.