Top-Rated Crude Oil Brokers and Trading Platforms

How Do I Start Trading Crude Oil?

Traders should start with in-depth education about the oil market, as it consists of many moving parts. Fundamentals play a significantly more dominant role in trading crude oil than technicals.

The primary drivers for crude oil are:

• Supply and demand, making global GDP a core data point
• OPEC adjustments to production, as it accounts for approximately 40% of global oil production
• Oil production data from Saudi Arabia, the US, and Russia, the top three oil producers

Most crude oil contracts remain priced in US Dollars, but competitive brokers list alternate ones quoted in various currencies, offering advanced traders another variable. Traders should consider the quote currency of an oil contract, a secondary driver of price action but a potential short-term catalyst when no primary ones exist.

Traders should decide which asset suits their trading strategy. Crude oil instruments consist of crude oil futures or spot contracts, oil equities for upstream and downstream companies, or ETFs. The two benchmarks for crude oil are West Texas Intermediate for North America and North Sea Brent for the global market. Opening and funding a trading account is the final step, which allows traders to execute their previously developed crude oil trading strategies.

Oil Trading Explained

Crude oil is ideal for scalpers and high-frequency traders due to its liquidity and low spreads. OPEC lost control of the oil market over the past decade. Russia and the US yield significant influence over price action, sometimes countering Saudi Arabian policies, the primary oil producer within OPEC.

Facts to know before trading crude oil:

• Crude oil is a volatile commodity.
• West Texas Intermediate (WTI) and North Sea Brent are the two most traded oil assets.
• Brent crude remains the global standard, while WTI is more US-specific.
• Brent trades above WTI in terms of price, known as the WTI/Brent spread.
• The oil price is volatile and influenced by geopolitical events, the economy, and the weather.
• CFDs remain the best oil trading instrument, granting traders exposure to price action without purchasing the underlying asset.

Noteworthy:

• US and Canadian regulators do not allow CFD trading and deploy an outdated regulatory framework.
• Therefore, traders can transact in options, which have an expiry date after which they become worthless, or legally binding futures contracts to deliver crude oil.

Oil Trading Regulations

Traders should ensure that they trade with a regulated broker but must also consider the regulator. The ESMA in the EU, the SEC in the US, and the IIROC in Canada have strict and counter-productive rules. Despite the regulatory climate, the most significant frauds occurred in the US and Cyprus. Regulators including the ASIC (Australia), the FSCA (South Africa), the BVIFSA (British Virgin Islands), the FSC (Seychelles), the IFSC (Belize), the DFSA (Dubai), and the CIMA (Cayman Islands) remain among the most competitive and trustworthy ones, but none allow US-based traders.

Trading Crude Oil in the US

Since US traders cannot benefit from CFD trading due to SEC regulations, their best product is an oil exchange-traded fund (ETF). Futures contracts on US crude oil and UK Brent crude traded on the NYMEX, where one contract equals 1,000 barrels, is another option for more significant portfolios. The e-mini crude oil futures contract written by the CME Group offers smaller portfolios an improved asset and consists of 500 barrels of oil.

How to Choose an Oil Broker for Forex Oil Trading?

Since crude oil is a highly liquid asset, most Forex brokers offer it. Traders have various preferences and requirements, but I chose to focus on the below aspects during my best oil trading brokers research, as they apply to all traders.

Traders should look for the following to ensure trading with the best oil trading brokers:

• Regulation - 10+ years of operational experience with a clean regulatory track in a trader-friendly jurisdiction.
• Low Forex trading fees - Low trading fees and low swap rates, including positive ones, and free rollovers on CFD contracts, which ensures traders keep a position after an oil contract expires
• Trading platforms - Algorithmic trading is necessary, while Forex copy trading and mobile trading are optional.
• Asset diversity - Ideally, oil contracts in various currencies quote currencies.
• Deposits/Withdrawals - No internal fees, a choice of payment processors, and low minimum transactions.

How to Choose an Oil Trading Platform

While the trading platform choice depends on individual preferences and requirements, I recommend using one that caters to all trading strategies, which would confirm it as a cutting-edge trading solution, such as MT4 or MT5.

Here is what every competitive trading platform should offer oil traders:

• A clean user-interface
• An extensive charting package for detailed analysis
• Multi-screen support for advanced, in-depth market analytics
• An integrated economic calendar
• Algorithmic trading support, ideally with API trading
• Real-time price feeds, ideally with Level II pricing
• Customizable alerts and push notifications
• A choice of order types, including trailing stop-loss orders and pending orders
• Extensive customization options
• Ability to integrate with third-party trading tools
• Copy trading features

Best Crude Oil Trading Platforms

The MT4 trading platform and cTrader remain two of the best choices. The former is the most versatile one, and the latter the best out-of-the-box solution. The best brokers for trading oil futures will offer one or both. Several brokers also provide proprietary trading platforms as an alternative, but most of them support manual trading only, which suffices for new traders but is not enough for advanced ones.

What Fees Should You Focus on When Choosing an Oil Trading Broker?

Oil traders should focus on three types trading fees, depending on trading strategy and cost structure for oil contracts. Therefore, not all fees may apply.

Here are the three oil trading fees that should be considered:

• Spreads: This applies to every trade at every broker. The spread is the difference between the bid and the ask price, and competitive oil brokers offer WTI crude contracts, the most traded ones, with a spread starting at $0.03 per contract.
• Commission: A commission applies to each oil transaction, but many oil brokers offer oil commission-free, with the commission effectively built into the spread.
• Swap Rates: Oil traders who use leverage and keep their positions open after the rollover time, usually 17:00 (EST), incur financing rates known as swap rates. They apply to long and short positions and can add significant costs to a crude oil position. It makes sense to learn the swap rate before any long-term trade is entered. Note that swaps for long and short trades will usually differ.

Oil Trading Account Types

Oil is one of the most volatile assets, and trading from the appropriate account type allows traders to achieve improved trading results. New traders should consider a micro account, ideal for learning how to trade with deposits under $1,000. It precedes the mini and standard ones, best suited for portfolios below and above $10,000, respectively. Some provide VIP accounts that grant special non-trading-related bonuses. Not all brokers maintain a multi-tier account structure. Therefore, traders should ensure that the minimum transaction size is 0.01 lots.

How to Choose the Right Account for Oil Trading

The primary aspect to consider is trading fees, as they will directly impact the profitability of any oil trading strategy. They also reveal which strategies a broker actively supports and passively discourages. Many brokers offer commission-free oil trading, meaning an increase in the spread to earn money from oil trades. A competitive oil spread is $0.03 to $0.04 per contract.

Oil is a highly liquid trading instrument that experiences plenty of volatility. Therefore, traders must trade with a Non-Dealing Desk broker, offering NDD accounts with average order execution speeds below 75 milliseconds, deep liquid pools, and no re-quotes.

What Leverage Is Available for Oil Traders?

While the leverage depends on the crude oil broker, the industry standard at competitive crude oil brokers who are not subject to regulatory limitations is 1:100. Therefore, for each $1 of margin, a trader can control a $100 crude oil position. Negative balance protection ensures traders cannot lose more than they deposit and forced liquidation triggers if trading accounts breach margin ratios to assist with risk management.

Some countries, notably the EU, UK, and the USA, limit maximum leverage on crude oil. In the EU it is 1:20 and in the USA and the UK it is 1:10.

What Are the Risks Involved in Oil Trading?

While oil is a highly liquid asset that traders can easily buy and sell without facing issues, it can also experience extreme volatility. Oil ranks among the assets facing the most exposure to fundamental events, making it an unpredictable trading instrument unsuitable for beginners.

The core risks involved in oil trading are:

• Supply risks from oil exporters, including OPEC+ production quotas
• Demand risk from oil importers, including the move to renewable energy sources
• Economic data disappointments, primarily GDP data from China, India, and the US
• Interest rate decisions - primarily interest rate increases
• Geopolitical risks, like conflicts, wars, and sabotage of the oil and transport infrastructure

Bottom Line

Crude oil is one of the most-traded commodities, and together with gold, the primary diversification trade for Forex traders. It is a highly liquid asset, usually quoted in US Dollars, and West Texas Intermediate and North Sea Brent are the primary global benchmarks for trading crude oil. Some brokers offer 1:100 leverage with negative balance protection. Spreads, commissions, and swap rates on leveraged overnight crude oil trades are the three trading costs traders must carefully evaluate.

Futures and spot contracts are the two primary assets used to trade crude oil. The former refers to contracts for future delivery, while the latter is for on-the-spot delivery. Alternate methods are via equities in upstream and downstream oil companies and ETFs. ETFs continue to gain market share, which offers less risk if the ETF is well-diversified.

Fundamentals play a significantly more dominant role in trading crude oil than technicals. Therefore, trading crude oil involves more unpredictable short-term catalysts. Supply and demand are the ultimate drivers of price action, making global GDP data, geopolitical events, developments in the supply chain, and production changes from OPEC, the US, and Russia core areas for traders to focus on for long-term trends.