This page explains where WTI and Brent are priced, the two types of crude oil CFD and what a price move costs you. You’ll also find out what shifts the oil price, the leverage limit for retail accounts and details on natural gas. Leverage is the ratio between your trade size and the deposit backing it.
Key points
- WTI gets its price from a futures contract on NYMEX, part of CME Group. The Brent price comes from a futures contract on ICE Futures Europe. One contract of either is 1,000 barrels (CFTC staff report, ICE contract page).
- A crude oil CFD tracks a futures price. Your provider either rolls it from one monthly contract to the next or creates a continuous “spot” price and charges the difference each night.
- If the company that opens your account is regulated in the EU, the UK or Australia, retail leverage on oil and natural gas is capped at 10:1. At that cap a move of 10 % against you costs your whole margin, the deposit you put behind the trade (ESMA press release, FCA PS19/18, ASIC 20-254MR).
- Oil prices shift with the choices producers make, the weekly stock numbers and the health of the global economy. None of those appears on a chart ahead of time.
- On 20 April 2020 the expiring WTI futures contract settled at -$37.63 a barrel. That price was the first negative price in the contract’s history (CFTC release 8315-20).
WTI and Brent crude oil: what is the difference?
WTI and Brent are the two crude oil benchmarks, the prices against which other oil grades are quoted. Both are light, sweet crudes, meaning they are thin and low in sulphur, making them cheaper to refine (EIA, 28 October 2014).
| WTI | Brent | |
|---|---|---|
| Full name | West Texas Intermediate | Brent |
| Where the oil comes from | The United States | The North Sea, from UK and Norwegian fields |
| Futures exchange | NYMEX, part of CME Group | ICE Futures Europe |
| Size of one futures contract | 1,000 barrels | 1,000 barrels |
| Priced in | US dollars a barrel | US dollars a barrel |
| What happens at expiry | Physical delivery at Cushing, Oklahoma | Cash settlement against the ICE Brent Index, or an agreed physical exchange |
The delivery rule is the difference that matters most. If you hold a WTI contract to expiry, real oil changes hands at the Cushing inland pipeline hub. That means its price close to expiry depends on how much storage space is available at Cushing. A Brent futures contract can be settled in cash. Your provider’s WTI CFD may be labelled US Crude, USOIL or CL, and its Brent CFD may be labelled UK Crude, UKOIL or BRENT.
How does a crude oil CFD work: spot and futures contracts
A crude oil CFD mirrors the price of a futures contract, since crude oil doesn’t have one spot price that trades continuously. Providers offer that futures price in two forms, and the contract specification tells you which one you’re trading.
Futures-based oil CFDs
A futures-based oil CFD tracks one named monthly contract, such as the December WTI future, and has its own expiry date. Before that date, your provider either closes your trade or moves it to the next month’s contract. This move is called the roll. The new contract nearly always has a different price, so your provider adjusts your cash balance to cancel the jump. You pay the spread on the switch. The spread is the gap between the buy price and the sell price.
Spot oil CFDs
A spot oil CFD never expires. Your provider creates its price using the two nearest futures contracts, shifting slightly from one to the other each day. The difference in price between these contracts is passed on to you as a nightly charge or credit, often displayed alongside overnight financing. Whether you pay or get money depends on your trade’s direction and the shape of the futures curve.
What the roll costs you
The roll costs you most in contango, when later contracts are priced above nearer ones. In this shape, a long position, a trade that gains when the price rises, bears a steady drag. Backwardation is the reverse shape, and there the drag falls on a short position instead, a trade that gains when the price falls. For the sums, see the commodities trading page. The nightly charge is on costs and fees.
Contract size and what a move in the oil price costs
Illustrative figures: a made-up example, not a forecast or a quote.
The contract size sets how much each dollar move in the oil price is worth to you. The figures shown here are hypothetical examples to illustrate the calculation. Your provider’s contract specification lists the actual values, and lot sizes vary from one platform to another. A lot is the unit your platform uses to measure trade size.
- Say oil trades at $70 a barrel and your platform’s lot size is 100 barrels. That makes one lot a $7,000 trade, a figure called the notional value, the full size of the trade.
- On that lot, your result shifts by $100 for each $1 the price moves. A move of 10 cents is worth $10.
- Suppose the margin rate is 10 per cent. To open the trade, your provider sets aside $700 of your balance.
- If oil drops $3.50 in a day, a 5 per cent move, your long trade loses $350. Half the margin is wiped out on a move oil can make in one session.
By plugging in your own figures, you can see how far the price can shift before a loss exceeds your plan. The risk management page shows how to turn that loss into a trade size, while pips and lots explains lot sizes.
What moves the oil price?
The oil price shifts when the balance between supply and demand changes, or when traders anticipate a change in that balance. Three things are responsible for most of the movement.
OPEC and OPEC+
OPEC is a group of oil-exporting countries that sets production targets for its members. When it lowers those targets, oil prices have tended to rise. Its members produce about 35 % of the world’s crude (EIA). The name OPEC+ covers OPEC plus 10 other exporting countries that agree output with it (CFTC staff report).
Inventories and the EIA weekly report
Inventories are the stocks of crude and fuel held in storage. The most watched oil release is the weekly count from the US Energy Information Administration. The EIA publishes its Weekly Petroleum Status Report after 10:30 a.m. US eastern time on Wednesdays, and a day later in some holiday weeks (EIA release schedule). Traders compare the change in stocks with what was forecast. Spreads often widen around the release. An economic calendar lists it next to the other scheduled data.
Demand, wars and weather
Oil demand tracks the global economy, with economic growth standing as one of the biggest factors in how much fuel gets used (EIA, 16 August 2023). Wars, sanctions and severe weather can cut the flow of oil to market and move prices with no warning (EIA, 16 August 2023). How supply and demand news gets priced in is covered on the fundamental analysis page.
What leverage can you use on oil?
If the company that opens your account is regulated in the EU, the UK or Australia, leverage on oil is capped at 10:1 for a retail client. Every commodity except gold falls under the same cap. Under it you put down at least 10 % of the trade’s value as margin (ESMA Decision (EU) 2018/796, FCA PS19/18, ASIC 20-254MR).
Gold sits one step higher at 20:1 under the same rules (ESMA Decision (EU) 2018/796), and the gold trading page walks through those rules. Companies regulated outside those places, a group’s global company included, may offer far more on oil. For the caps market by market, see the leverage and margin page.
The cap is a ceiling, but you can use less than that. Providers can ask for more margin than the rule asks for, and some raise it before an OPEC meeting or when the market is in turmoil. At a company regulated in the EU, the UK or Australia, your provider closes trades under the margin close-out rule if your account falls too low.
How natural gas trading differs from oil
On a CFD platform, natural gas trading works the same way as oil trading. Yet the market behind it is more local and more seasonal. The US benchmark is Henry Hub, a pipeline hub on the Louisiana Gulf coast, and it is the delivery point for the natural gas futures contract on NYMEX (EIA glossary).
Gas prices depend on production, how much is in storage and the weather. Cold winters increase demand for heating, while hot summers increase demand from power stations (EIA). The EIA releases its Weekly Natural Gas Storage Report at 10:30 a.m. eastern time on Thursdays (EIA release schedule).
Natural gas is harder to store and move than oil, so its price swings are often larger and its futures curve has a steeper seasonal slope. At a company regulated in the EU, the retail cap for gas is 10:1, the same as for oil (ESMA Decision (EU) 2018/796).
April 2020: when the WTI price went below zero
On 20 April 2020, WTI fell below zero, the day before the May futures contract expired. The contract dropped from $17.73 a barrel and settled at -$37.63, the first negative price since WTI futures began trading 37 years earlier (CFTC release 8315-20). During that session, it reached as low as -$40.32 (CFTC staff report).
Three things came together in 2020, according to the CFTC, the US futures regulator. Too much oil was already in the market, COVID-19 brought on a collapse in demand and traders worried storage would run out (CFTC release 8315-20). At expiry, anyone still holding the contract had to take delivery of oil at Cushing. With little storage left to book there, some holders paid others to take the contracts off their hands (EIA, 27 April 2020).
Every other WTI contract month settled above zero on 20 April 2020 (CFTC staff report). So the behaviour of an oil CFD on that date depended on which contract it tracked and whether it had been rolled already. You can find both the roll date and the contract being tracked in the specification.
Risk warning
Oil CFDs can lose your deposit on one report
In a single session, oil CFDs can wipe out your whole deposit. At a company regulated in the EU, the 10:1 cap that applies means a 10 % move against you equals all of your margin (ESMA Decision (EU) 2018/796). Crude can also gap past a stop-loss on an OPEC decision or a stock report. A gap is a jump straight to a new price. A stop-loss is an order to close at a price you chose. The national studies ESMA reviewed found that between 74 % and 89 % of retail CFD accounts lost money (ESMA press release, 27 March 2018).
Questions people ask about oil trading
Oil trading questions that people search for most are answered here in a few sentences each.
How do you trade crude oil?
You can trade crude oil using futures on an exchange, through funds that hold futures, or via a CFD with a provider. A crude oil CFD pays or charges you the change in a futures price and never delivers any oil. The contract specification states the lot size, the margin rate, the roll date and the nightly charge. The how to start trading page walks through the steps, and you can compare brokers on what each one publishes.
What is a Brent crude oil CFD?
A Brent crude oil CFD is a contract with a provider that follows the price of Brent futures on ICE Futures Europe. You gain or lose the change in price on the number of barrels you trade, and you never own oil or a futures contract. It is either tied to one monthly contract with an expiry date or built as a continuous price with a nightly adjustment.
Is there an oil trading strategy that works?
No oil trading strategy is shown to work reliably, and most retail CFD accounts lose money. Between 74 % and 89 % of retail CFD accounts lost money, according to findings from national regulators (ESMA press release, 27 March 2018). The trading strategies page explains how to test a trading strategy after costs.
Can a crude oil forecast or signal tell me where the price is going?
A crude oil forecast is an opinion about the future, and nobody can know where the price will go. People who sell paid signals for oil or natural gas earn from the subscription whether you win or lose. The forex signals page covers what to check before trusting one.
Can I lose more than my deposit trading oil CFDs?
As a retail client, you can’t lose more than your CFD account balance if the company that opens it is regulated in the EU or the UK. Those companies must give negative balance protection (ESMA Decision (EU) 2018/796, FCA PS19/18). A company regulated in Australia must also give it (ASIC 20-254MR). But a global company may not offer the protection at all.
Sources
The original documents this page cites, in the order they first appear.
- Commodity Futures Trading Commission, CFTC
- Interim Staff Report: Trading in NYMEX WTI Crude Oil Futures Contract Leading up to, on, and around April 20, 2020, CFTC, 2020-11-23
- Brent Crude Futures, Intercontinental Exchange (ICE)
- European Securities and Markets Authority, ESMA
- ESMA agrees to prohibit binary options and restrict CFDs to protect retail investors, ESMA, 2018-03-27
- Financial Conduct Authority, FCA
- PS19/18: Restricting contract for difference products sold to retail clients, FCA, 2019-07-01
- Australian Securities and Investments Commission, ASIC
- 20-254MR ASIC product intervention order strengthens CFD protections, ASIC, 2020-10-23
- CFTC Staff Publishes Interim Report on NYMEX WTI Crude Contract Trading on and around April 20, 2020 (Release 8315-20), CFTC, 2020-11-23
- Benchmarks play an important role in pricing crude oil, U.S. Energy Information Administration, 2014-10-28
- What drives crude oil prices: Supply OPEC, U.S. Energy Information Administration
- Weekly Petroleum Status Report: release schedule, U.S. Energy Information Administration
- Oil and petroleum products explained: Oil prices and outlook, U.S. Energy Information Administration, 2023-08-16
- ESMA Decision (EU) 2018/796 of 22 May 2018 to temporarily restrict contracts for differences in the Union, Official Journal of the European Union (EUR-Lex), 2018-05-22
- Glossary: Henry Hub, U.S. Energy Information Administration
- Natural gas explained: Factors affecting natural gas prices, U.S. Energy Information Administration, 2023-10-25
- Weekly Natural Gas Storage Report: release schedule, U.S. Energy Information Administration
- Low liquidity and limited available storage pushed WTI crude oil futures prices below zero, U.S. Energy Information Administration, 2020-04-27