Which countries export oil
The world's largest oil producers
How can you trade oil?
You can gain access to the oil market by trading oil. How you proceed depends on your personal preferences, risk tolerance and when you want to act. You can speculate on the price of oil, oil futures and oil options through CFDs, Turbo24 or options.
Trade oil price movements
With IG, you can use derivatives such as CFDs to trade oil without actually owning the commodity. One of the advantages of trading derivatives is that you have the option to trade with margin. This means that you only need a small percentage of the value of the underlying asset to open a position, but still trade the full value. This allows you to amplify potential gains and losses.
Trade these financial instruments to gain access to the oil market:
Spot oil prices represent the cost of buying or selling petroleum instantly. Trading oil at its spot rate means you are trading the current price of the underlying market. This method is popular with short term traders as the cash markets generally offer tighter spreads. However, if you want to keep your positions open overnight, an additional funding fee will apply.
Find out more about trading petroleum here
If you want to trade petroleum at a specific price on a specific date, oil futures are for you. Futures are traded on exchanges and reflect the demand for different types of oil. This method is preferred by traders with a longer-term view of the markets, as positions can be held without incurring overnight funding costs. Oil futures generally offer slightly larger spreads, which is because the overnight funding fee is already included.
An oil option works similarly to a futures contract, except that there is no obligation to trade if you do not want to (when buying). With IG you can trade options with derivatives. There are two types of options: calls and puts. If you think the price of oil could go up, consider buying a call option. If you think the market price is falling, buy a put instead. You can also sell call and put options if you want to take opposing positions. However, when selling, you have an obligation to trade at the strike price if the option is executed by the buyer when it expires.
Learn more about options here.
To start trading petroleum, you need to open a live trading account with IG.
Outlook on the oil industry
The future of the oil industry depends on three main factors: the longer-term effects of the coronavirus pandemic, economic growth in countries like the US and China, and the outlook for renewable energy sources.
The corona crisis has created great uncertainty in the oil markets, and although there is no way of knowing for sure what the lasting effects could be, the discussions have increasingly focused on the future. Economic measures to support the oil industry during the crisis may mitigate the effects of the crisis, but the changes will inevitably have significant effects on production and consumption.
In addition, the world's largest economies can have a major impact on their GDP growth due to the shift in oil supply and demand. It therefore remains to be seen how these economies will react to production cuts, but it is likely to have lasting effects on the liquidity and volatility of the oil market.
Finally, the US Energy Information Administration (EIA) predicts a decline in traditional US energy consumption (oil, coal and gas) in the coming years. According to the agency's forecasts, the use of renewable energies will increase from 17% in 2019 to 21% in 2020 and finally to 23% in 2021.1 However, the global economy is still highly dependent on oil, which is still represents one of the most valuable resources in the world.
If you are interested in gaining access to the oil market, it is important to keep an eye on the latest news and make sure you have a good risk management strategy in place.
1 EIA, 2020
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