30April2010
Trading the Crude Oil Futures Markets
The crude oil markets are behaving a little strangely with Brent Crude Oil now $2 per barrel higher than the US Crude Oil market. Not so long ago it was the other way round.
If you look at the long term averages you can see that US Crude Oil normally trades at around $1 per barrel higher than Brent Crude. As a result, crude oil market makers are seeing investors selling Brent Crude in the day trading markets.
This type of trade has proved very profitable over the last few years as the price difference has continually moved up to these types of levels only to reverse back again later on. Note that you can speculate on the price difference through Contracts for Differences (CFDs).
The worrying thing about it this time is that the oil markets are ‘futures’ and the price has widened at a time that is not close to the expiry date of the futures contract. As contract expiry looms you can often see unusual moves as traders are forced out of positions. This time though this is not the case and investors looking to take advantage of the price difference should be wary of getting too carried away.
There are a number of Financial Service Authority regulated spread trading and CFD companies that offer thousands of international markets such as Crude Oil, Gold, Foreign Exchanges. A number of these companies also let you trade markets outside normal market hours.
Before you trade though, please note that, CFDs carry a high degree of risk to your capital. It is possible to lose more than your initial investment. Only speculate with money you can afford to lose. These products may not be suitable for all investors, therefore ensure you fully understand the risks involved, and seek independent advice if necessary.