Best Oil Trading Brokers 2018
Crude oil trading is not for inexperienced traders. Apart from possessing the necessary trading skill, crude oil traders also require the best brokerage services. Here we list the very best brokers to trade oil with, based on trading conditions, customer support and outstanding product.
Oil Trading Explained
Understanding what kind of contracts you will trade on your platform as well as other contract specifications for the crude oil asset will enhance your trading experience as you engage this asset in the financial markets. So what awaits you when you trade crude oil?
Oil is one of the hottest commodities traded on commodity exchanges as well as on forex platforms as a CFD asset. Oil is a soft commodity, which is extracted from the ground. The derivatives of crude oil are used in so many industries that it is hard to think of a world without it. The volatility in the price of crude oil makes it a tradable asset. Available contracts for trading oil include the following:
- Spot contracts
Oil is traded in the futures market, primarily located on the New York Mercantile Exchange (NYMEX). The oil futures market is traded round the clock, except for a one-hour break within each trading day when the open outcry markets shut down and the CBOT markets kick in.
Crude oil trading can be done in two ways:
- As spot contracts with immediate settlement and delivery.
- As futures contracts with settlement and delivery provided for in 3 months. However, pricing of the contracts is usually settled immediately.
It is very expensive to trade crude oil on the futures and options exchanges. The margin requirements for trading crude oil on the exchanges as futures or options contracts are very high and many retail traders cannot afford it. Retail traders can however access trading on the asset, usually in the form of contract-for-difference (CFD), which does not involve physical exchange of the asset.
Oil prices are highly susceptible to economic and political factors (e.g. conflict in oil producing countries), as well as production levels, OPEC quotas and the state of global supplies. Crude stockpile statistics also play a major role in the pricing of crude oil.
Traditionally, the Brent crude (UK crude) price is higher than that of US crude (light sweet). This is because Brent crude is a heavier type of crude with a lot of impurities which need to be cleaned out during refining. This is a more expensive process, which makes the cost of UK crude higher than that of US crude.
How to Choose a Crude Oil Trading Broker
When choosing a broker to offer you with the best in crude oil trading, you need to consider the following factors:
- Regulation: Is the broker regulated? If yes, what are the conditions attached to the trading of crude oil by the broker?
- Trading platform type: What trading platforms are featured and what is the crude oil asset listed as?
- Software: What software is available to trade crude oil?
Many regulated brokerages offer the trading of crude oil contracts. Usually, two contracts can be found: contracts for light sweet crude (also known as US crude on some platforms) as well as Brent crude (also known as UK crude).
Apart from broker regulation, other factors to consider include the stance of regulators on the leverage and margin requirements for the trading of crude oil contracts. The Commodities and Futures Trading Commission (CFTC) introduced a leverage cap for commodities traded as futures and options assets, pegging the maximum allowable leverage at 1:20. This placed a huge capital demand on the trading of crude oil on retail brokerages.
However, regulated brokers in Europe, Australia, and the United Kingdom do not place such restrictions, thus allowing more participation from the retail public in the trading of crude oil contracts.
Crude Oil Trading Platforms
Crude oil can be traded on the following retail platforms:
The common form of crude oil contracts listed on these market maker platforms is the pairing of crude oil with the US Dollar (Oil/USD). Usually, contracts exist for both US crude and UK crude.
Crude oil is also available on professional trading platforms such as those of LMAX and Currenex.
There is a range of automated trading software available to trade crude oil on the various platforms used in the forex and commodity markets. Traders should match the programming languages of their platforms with the software they want to in order to create a compatible trading environment.
Oil Trading Account Types
Oil can be traded in both directions: upwards using long orders or downwards using short orders. Crude oil is a very volatile asset and price movements can be unpredictable. Therefore it is essential that traders are offered account types that match their risk appetite. The brokers we showcase offer the following account types:
- The micro account: This is the beginner level account and provides for restricted contract sizes to enable the traders in this category to minimize risk. Usually, only micro-lot trading is available here.
- Intermediate level accounts are provided for traders with some level of experience, but who do not have access to large capital. This account type allows mini-lot trading, but trade sizes are usually capped at 1 Standard Lot.
- VIP/Platinum accounts: Only traders with lots of experience and large capital are allowed to operate VIP accounts. This account type also comes with some special bonuses.
Commissions & Spreads
On retail platforms such as the MT5, crude oil trading attracts both commissions and spreads. On ECN platforms, traders are expected to pay commissions on trade entry and exit.
Our list of crude oil trading brokers features brokers with the following characteristics:
- Brokers that are regulated by CySEC, ASIC and FCA
- Brokers that have structured account types for various categories of traders.
- Brokers whose platforms permit the use of the automated trading software.
- New Zealand
- South Africa
- South Korea
- Hong Kong
- United Arab Emirates
- Russian Federation
List of Brokers
|BROKER||USER RATING||REGULATED BY||HEADQUARTERS||MIN. DEPOSIT||OFFICIAL SITE|
|ASIC, CySEC, FCA||Israel||$100||Open Account|
|ASIC, BVI, FSA(JP), FSB, MiFID||Ireland||$100||Open Account|
|ASIC, CySEC, FCA||Cyprus||$200||Open Account|
|CySEC, FSB||Cyprus||$100||Open Account|
|BaFin, FCA||United Kingdom||$300||Open Account|