What is spot oil and how do you trade it?
Oil is a very volatile commodity, especially in times of economic and political instability. You can trade spot oil whether the price goes up or down. Discover what spot oil is and how you can trade it with us using our award-winning platform.1
Start trading today. Call +44 (20) 7633 5430, or email sales.en@ig.com to talk about opening a trading account. We’re here 24/5.
Contact us: +44 (20) 7633 5430
Start trading today. Call +44 (20) 7633 5430, or email sales.en@ig.com to talk about opening a trading account. We’re here 24/5.
Contact us: +44 (20) 7633 5430
What’s on this page?
What is oil spot trading?
Oil spot trading is a technique used to buy and sell underlying oil assets at the current market level, called the spot price. Spot trading doesn’t have fixed expiry dates and tend to have lower spreads, making it popular among day traders.
With us, you can trade the oil spot market, also known as the cash or undated market, through CFDs which is a derivative product. This means that you don’t have to own the spot oil outright or take delivery of it, instead you can trade exclusively on its price movements.
Note that derivatives trading is high risk, and you should understand how they work and manage your risk carefully before opening a position.
Access real-time pricing
When trading oil on the spot, you’ll access prices which reflect the current market in real-time. The spot price is unlike the oil futures market, which specifies a price and date for a future transaction.
Get tight spreads
Oil spot spreads are tighter than those of futures, making them ideal for opening short-term positions. Note that overnight funding fees will apply if your position is open past 10pm (UK time)2.
With us, your account will have its interest adjusted to reflect the cost of funding your position. If you want to avoid paying overnight funding, you might want to consider opening longer-term positions such as trading futures or options.
Benefit from continuous charting
When trading spot oil, you can benefit from using continuous charts that not only track the current rise and fall of the market, but the historic price movement as well. This is different to the futures charts, which only track the price movement of the oil market over its lifetime until it reaches expiry.
You can conduct an in-depth market analysis when trading spot oil. It’s essential to carry out both fundamental and technical analysis before opening your spot oil position.
Through the use of fundamental analysis you can make an assessment of the spot oil market based on macroeconomic indicators and market forecasts. On the other hand, technical analysis will make use of oil spot chart patterns, technical indicators and its historical price movement.
Trade with leverage
With us, you can trade CFDs, which is a leveraged product. This means you’ll only be required to commit an initial deposit or margin to open a position that’ll give you increased exposure to the spot oil price market.
Remember that when trading with leverage, your profit or loss is calculated based on the entire size of your position, not just margin. This means that while leverage can magnify your profits, it’ll amplify your losses. It’s important to manage your risk carefully.
Before trading leveraged products, ensure you understand how they work. Also give some consideration as to whether you can afford to risk losing your money.
Go long or short
When trading the oil spot price, you have the option to either go long (‘buy’) or short (‘sell’). You’ll go long if you believe that the spot oil market price will rise and go short if you think it’ll fall.
With us, the profit and loss made on spot oil CFDs is calculated based on the accuracy of your prediction and the overall size of the market movement.
Speculate on Brent crude or WTI (US crude)
When you trade spot oil prices, you have the choice to do so from two dominant markets – Brent crude and West Texas Intermediary (WTI) known as US crude. Brent crude is manufactured in the European North Sea oil fields, while WTI is mined in North America.
Brent crude is used to set the international standard when trading oil contracts, futures and derivatives, while WTI is the benchmark in Northern America. The spot oil price differences or ‘quality spread’ occurs because of this underlying asset’s varying properties.
Both Brent and US crude oil are light and sweet, which makes them easier for petrol producers to refine and process. With us, you can also trade Crude Palm Oil, Heating Oil, London Gas Oil, Natural Gas and Gasoline.
Make sure the spot market is how you want to trade oil
In addition to trading spot oil markets, you can also trade oil futures and oil options
| Oil futures | Oil options | Oil spot price | |
| How it’s priced | Based on listed exchange price | Based on listed exchange price | ‘On the spot’ or current value of oil, with continuous, real-time pricing |
| Ways of trading | CFD trading | CFD trading | CFD trading |
| Can I short oil? | Yes | Yes | Yes |
| Can I speculate on negative oil prices? | Yes | Yes | Yes |
| Commodities energies markets | US crude, Palm oil, Heating oil, No Lead Gasoline, Natural gas, Carbon emissions | US crude, Brent crude, Palm oil, Heating oil, No Lead Gasoline, Natural gas, Carbon emissions | US crude, Brent crude, Palm oil, Heating oil, No Lead Gasoline, Natural gas, Carbon emissions |
| Costs and charges | Larger spread but no overnight funding charges | Higher premium but no overnight funding charges | Narrower spread but with overnight funding charges |
| Risk to capital | You could lose more than your deposit (margin) | Limited to premium if you buy put or call, could lose more than premium if you sell | You could lose more than your deposit (margin) |
| Expiry | Yes | Yes | No |
Understand how oil futures trading works
With us, you can use CFDs to trade on spot oil price movements. Note that CFDs are traded with the contract’s value set at a specified number of dollars (USD) per point or ‘tick’ of the spot oil price.
Create your account and log in
You can trade CFDs to speculate on the rise and fall of the spot oil price on our award-winning platform.1
You can open a demo account to familiarise yourself with trading spot oil. You’ll get $20,000 in virtual funds to practise your trades in a risk-free environment. When you feel ready to take on the live markets, you can open a live account. You’re not obligated to fund your live account or trade from it unless you’re ready.
Pick your spot oil market
When picking your spot oil market, you’ve the flexibility to choose which you’d like to trade. With us, you can choose to trade Brent crude, US crude (WTI), Palm Oil, Heating Oil or London Gas Oil.
Set your position size and manage your risk
Once you’re ready to take your position, go long by clicking ‘buy’ or go short by ticking ‘sell’. Then you can set your position size. Manage your risk by selecting your limit and stop-loss levels in the deal ticket. With us, there are several risk management tools at your disposal such as a normal stop-loss as well as guaranteed and trailing stops.
By selecting a normal stop-loss, you’re giving our platform an instruction to close your position when it reaches a price less favourable than the price at which you opened your position. Note that if slippage occurs, your order won’t be carried out at the specified price.
Guaranteed stops are implemented at the exact price you specify. These stops are similar to basic stops, they differ in that they’ll always be completed at your set level whether rapid price movements or gapping occur.
Trailing stops are set to adapt to market movements automatically by following your position. It works by locking in your gains when the market moves in your favour and by shutting your position if it moves against you.
Place your spot oil trade
Once you’re content with the spot oil size you’d like to trade and your risk management orders, open your trade by clicking on ‘place deal’. You can follow this step by monitoring your position.
Try these next
Discover everything you need to know about trading oil futures
Discover everything you need to know about commodity trading
Learn how get exposure to gold, step by step
1 Best Finance App, Best Multi-Platform Provider and Best Platform for the Active Trader as awarded at the ADVFN International Financial Awards 2022.
2 International times may vary.
IG | Terms and agreements | Privacy | How to fund | Cookies | About IG
^IG International Limited is part of the IG Group and its ultimate parent company is IG Group Holdings Plc. IG Group established in London in 1974, and is a constituent of the FTSE 250 index.
