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How to trade oil: a beginner’s guide

The ways to trade crude oil (futures, ETFs, options, oil stocks and CFDs), what moves the price, the weekly reports to watch, and how to keep the risk under control.

LemonTrades·Guides
An oil barrel next to a price chart with candles.

TL;DR

  • Brent is the global oil benchmark and WTI the US one; you can trade them through futures, ETFs, options or oil stocks.
  • Oil moves on OPEC+, the weekly API and EIA inventory reports, supply shocks and the economy.
  • It can move 5% in a day on one headline: start small and use stops.
  • Follow Brent and WTI on LemonTrades for OPEC+, inventory and supply headlines the moment they break, with alerts on sharp moves and the likely cause.

Oil is one of the most traded markets in the world, and one of the most dramatic: wars, OPEC decisions and weekly inventory numbers can move it several percent in minutes. Here’s how to get started.

MarketPriceToday
Brent crudethe global benchmark, per barrel$– –
WTI crudethe US benchmark, per barrel$– –
Natural gasper MMBtu$– –

Futures prices, delayed about 10 minutes. Full chart on our Brent crude oil page.

Brent or WTI?

There are two main oil prices. Brent, from the North Sea, is the global benchmark. WTI (West Texas Intermediate) is the US benchmark, delivered in Cushing, Oklahoma. They move almost together, with Brent usually a few dollars higher. Most US traders use WTI futures, the most traded oil contract in the world.

Five ways to trade oil

  • Futures. WTI crude (CL, 1,000 barrels) and micro WTI (MCL, 100 barrels) on CME, or Brent on ICE. Leveraged and almost 24-hour. See how to trade oil futures contracts.
  • Oil ETFs. USO tracks WTI futures and BNO tracks Brent futures, through any stock broker. They roll futures every month, so over time they can drift well away from the oil price.
  • Options on oil futures or oil ETFs, for leverage with a defined maximum loss when you buy them.
  • Oil company stocks and sector ETFs, like Exxon, Chevron or XLE. They follow oil partly, plus their own business.
  • CFDs, through brokers outside the US. They aren’t allowed for US retail traders.

What moves oil

  • OPEC+ decisions on how much to pump.
  • US inventories: the API report on Tuesdays at 4:30 PM ET and the EIA report on Wednesdays at 10:30 AM ET.
  • Supply shocks: conflict in the Middle East, attacks on shipping in the Strait of Hormuz or the Red Sea, sanctions, hurricanes in the Gulf of Mexico.
  • Demand: China’s economy, US driving season, recession fears.
  • The dollar: oil is priced in dollars, so a stronger dollar usually weighs on it.

The weekly reports are on our economic calendar.

Getting started

  1. Pick your instrument: micro futures to trade actively, an ETF for a simpler position.
  2. Open an account with a regulated broker that offers it. See choosing an oil trading platform.
  3. Learn the calendar. Know when the API and EIA reports and OPEC+ meetings are, and avoid being caught by them.
  4. Plan each trade: entry, stop and target, sized so one loss is a small share of your account.
  5. Practice first in our free trade simulator, which includes Brent and WTI.

Know the risk

Oil can move 5% or more in a day on a single headline. A full WTI contract changes by $10 for every cent, so a $1 move is $1,000; the micro contract is a tenth of that. In April 2020, the expiring WTI contract even settled below zero, at −$37.63, because there was nowhere left to store oil. Use stops, trade small, and know your contract’s expiry.

Education, not financial advice. Trading oil with leverage is risky and you can lose more than you deposit. See our disclaimer.

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