What reports to follow when trading oil

Daily

The Energy Information Administration (EIA) website provides the most up-to-date data on oil supply in the US market. These are published on a daily basis and are searched by many traders. The data presented here generally have a minimal impact on the oil price, due to their purely informative nature. This data is particularly useful if you want to trade on the WTI crude oil chart.

Weekly

DOE report - a regular weekly report of the US Department of Energy, published every Wednesday at 16:30 CET. It discusses the changes in the state of oil stocks and fuels (crude oil and its derivatives) in the US, so it is an ideal fundamental for tracking demand when trading on the WTI crude oil chart. This is a report with a fairly large impact on crude oil prices (especially WTI Crude oil).

^{Weekly DoE report (source: https://www.eia.gov/petroleum/supply/weekly/)}

Monthly

OPEC - MOMR (monthly oil market report) - the organization of the petroleum exporting countries (OPEC) currently consists of 13 member countries (Algeria, Angola, Congo, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Saudi Arabia, United Arab Emirates, and Venezuela). They control 40% of the global oil supply and up to 75% of total reserves. It is thus a really big player in the global oil market.

The monthly oil market report (MOMR) therefore has an immense impact on oil prices and the oil market in general, and you basically cannot ignore it when trading oil.

How to trade oil

There are 4 most common ways to trade oil:

• Trading in physical barrels of oil

• Purchase of futures contracts

• Investments in oil shares

• Speculation through CFD contracts​

Trading in physical barrels of oil

By "oil trader" most people probably think of a person who orders delivery of a certain amount of oil in barrels, which he then has stored somewhere. He then waits to see what direction the oil price will go in order to make a profitable sale.

And indeed, trading physical barrels is a legitimate way how to buy oil. However, for the retail investor/trader, it is absolutely unviable. In fact, the minimum order for oil in physical form is 1 contract, which is 1000 barrels of oil. So, if you calculate what the price of a barrel of oil is and add to that the amount needed to pay for the lease of a storage facility or a smaller fleet of cisterns, you will probably conclude that it would be better to consider other ways to invest in oil.
 

Purchase of futures contracts

Trading oil through futures contracts is often the chosen way to invest in oil. In essence, it is the purchase of a future delivery of a certain amount of oil in physical form, but with a predetermined expiration (delivery date). However, this does not usually happen because the principle of trading oil through futures contracts is to buy, wait for the price of oil to rise, and sell before the contract expires. If you can't make it, then we recommend renting a storage facility.
 

Investments in oil shares

As we have already mentioned, oil reaches almost every corner of the global economy, so it is not surprising that the oil industry is made up of a huge number of conglomerates, companies, and firms. Shares of these companies can be another good way to invest in oil. Whether they are oil exploration companies or oil refining companies, retail investors have the opportunity to share in their potential success. In addition, nowadays with countless online trading brokers, there are really many places to buy oil stocks.
 

Speculation through CFD contracts

A very popular method of investing in oil is through contracts for difference. These are broker-created speculative contracts, the price of which is usually derived from the price of oil futures contracts.

In this case, the trader does not own the oil directly, nor does he commit to its future ownership, but only speculates on the development of oil prices in any direction. The latter is linked to the price of oil futures contracts in CFDs.

Moreover, the entire process of trading oil CFDs is conducted exclusively online via a so-called trading platform. The trader is thus not tied to any particular location and can trade on his mobile phone, for example, on his way to work.
 

Advantages of CFD oil trading:

• It is possible to trade with smaller capital - of all the mentioned oil trading options, CFD contracts are among the most financially affordable. The minimum deposits here are around CZK 2,500 / EUR 100.

• Leverage - determines the ratio of the amount of capital you invest in a given trade to the funds provided to you by the broker. At Purple Trading, we offer 1:5 leverage for Brent crude oil trading (i.e. you can open a $ 500 trading position with $ 100) and 1:10 for WTI. This gives you a chance for higher profit when trading oil, but keep in mind that potential losses will also multiply.

• The ability to speculate on the rise and fall of oil prices - with CFD contracts, you do not own physical barrels of oil, which means that not only you don’t need to be worried about falling prices, but you even have the opportunity to profit from it. Provided that you will estimate that the price will fall.

How to choose a broker suitable for oil trading

You will need a brokerage agency to trade oil through CFD contracts. Here are a few characteristics a quality broker should meet.
 

Trading conditions

The speed of execution of trade orders is crucial (it is given in ms and the lower the number, the better). Furthermore, you should pay attention to spread prices (the difference between the BID and ASK price, again, the lower, the better). View execution statistics or spread prices at Purple Trading (oil spreads can be found under the Commodities tab).

Last but not least, commission fees are also important in oil trading. These are charged to traders for the volume traded and are usually given in USD / lot.

At Purple Trading, you can trade oil with zero commission.

Broker license

In general, brokers based in the EU are forced to show a higher degree of transparency due to regulations protecting clients. The so-called Offshore brokers, on the other hand, can offer higher leverage (1: 400 and more) with lower service fees. However, the client / trader is not protected to the same extent as with EU brokers.

Purple Trading falls under the Cypriot regulator CySEC. Our clients therefore have the highest possible level of protection in accordance with EU regulations.
 

Payment methods and banks

While offshore brokers offer their services at more attractive prices than their European counterparts, what a trader saves up in the realm of services, usually pays for transferring funds. If you do not want to pay transfer fees, we recommend a broker who has a bank account in the same currency as your bank account. Purple Trading has accounts in European banks and our clients can choose from EUR, PLN, GBP, CZK, and USD account currencies.