Crude Oil Trading Basics
Crude oil (OIL/USD) is one of the most volatile and politically sensitive commodities. Learn what moves oil prices and how to trade it effectively.
- 1Oil prices are heavily influenced by OPEC production decisions.
- 2Weekly US crude inventory data (EIA report) causes sharp short-term moves.
- 3Brent and WTI are the two main benchmarks — AlgoraFX trades WTI.
- 4Oil correlates with risk sentiment — it tends to fall during recessions.
Crude oil is the most traded commodity in the world, with prices affecting everything from petrol costs to airline ticket prices. For traders, it offers significant volatility and regular news-driven opportunities.
What Drives Oil Prices?
OPEC+ production decisions — The Organisation of Petroleum Exporting Countries controls roughly 40% of global supply. When OPEC cuts production, prices rise. When they increase output, prices fall. OPEC meetings are major market events.
US inventory data — Every Wednesday, the Energy Information Administration (EIA) releases US crude stockpile data. Higher than expected inventories = bearish for oil. Lower than expected = bullish.
Global demand outlook — Economic growth drives energy demand. Strong GDP growth in China and India is especially important as they are the world's top oil consumers.
Geopolitical events — Conflicts in oil-producing regions (Middle East, Russia) cause sharp supply fears and price spikes.
WTI vs Brent Crude
There are two primary crude oil benchmarks:
WTI (West Texas Intermediate) — US-produced crude, considered slightly lighter and sweeter. The NYMEX exchange in New York is the primary trading hub.
Brent Crude — Produced in the North Sea, this is the global benchmark. About 70% of internationally traded oil is priced relative to Brent.
The two prices are usually within $2–$5 of each other. AlgoraFX offers OIL/USD based on WTI pricing.
Tips for Trading Oil
Trade around EIA releases — Wednesday afternoon (3:30 PM GMT) sees big moves. Either stay out during the release or wait for the initial spike to fade before entering.
Watch $5 round numbers — Oil consistently finds support and resistance at round dollar levels ($80, $85, $90).
Monitor DXY — Like gold, oil is priced in USD. A stronger dollar puts downward pressure on oil prices.
Be aware of rollover dates — Oil futures expire monthly. CFD prices can gap as contracts roll over.
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