Oil Trading Guide: Strategies and Key Considerations

  • 15/12/2023

Which brand of oil should I choose?

Brent Crude and WTI (West Texas Intermediate) are two of the most common crude oils used in global trade. When choosing between them, consider the following factors:


Brent crude oil is produced in the North Sea, mainly in the area of the Brent and Fortis oil fields. This is oil from Great Britain, Norway and other Northern European countries.
WTI oil is produced in the West Texas and northern Gulf of Mexico region of the United States.

Oil quality

Brent generally has a lower density and lower sulfur content compared to WTI. This makes it suitable for the production of gasoline and diesel fuel.
WTI has a higher density and is therefore suitable for making lubricating oils.

Price and volatility

The price of Brent is often higher than that of WTI. This is due to geopolitical factors and demand in global markets.
The price of WTI oil is generally less volatile and is dependent on factors related to the economic and political environment in the United States.

Geographical distribution

Brent oil is widely used in Europe, Asia and other parts of the world except North America.
WTI is popular in North America, especially in the USA.

Trading platforms

In global markets, Brent is most often traded on the ICE (Intercontinental Exchange) in London.
WTI is primarily traded on the NYMEX (New York Mercantile Exchange) in New York.


Traders need to consider price differences, regional demand, geopolitical events and their trading strategies when choosing between Brent and WTI oil.

Factors influencing the price of oil

The price of oil is affected by various factors that may change over time:

  • Supply and demand. This is the main factor. The level of demand for oil, especially from large consumers, and the supply of oil, including production and exports, have a significant impact on the price.
  • Geopolitical events. Conflicts, wars, sanctions and political instability in regions can lead to significant price changes due to possible supply interruptions.
  • Exchange rates. Changes in exchange rates can affect the price of oil since oil is traded in US dollars. A stronger or weaker dollar could change the price of oil for foreign buyers.
  • Oil reserves. The level of oil reserves on the market affects its price. Increasing inventories lowers prices, while shortages raise them.
  • Technological innovation. New technologies in the field of oil production and refining affect the balance of supply and demand, as well as prices.
  • Macroeconomic factors. Economic indicators such as inflation, unemployment and GDP growth affect the level of oil consumption and, therefore, the price.
  • Policy and regulation. Decisions by governments and international organizations, including agreements to reduce production (for example, the OPEC+ agreement), affect the price of oil.
  • Weather. Climate events, such as hurricanes or prolonged periods of cold weather, can cause interruptions in oil production and transportation, which increases prices.

Oil trading strategies

Experienced traders use a variety of strategies to effectively trade oil. Finding the right strategy based on your goals, trading style, and current market conditions is key to success.

  • Fundamental analysis. Fundamental analysis is an integral part of oil trading and involves the study of economic, political and other important events that may affect the supply and demand of oil. This involves analyzing various data such as oil reserves, production figures, political events and economic indicators. Understanding these factors helps traders make informed decisions and build strategies based on fundamental data. For example, if the US oil inventory report indicates an increase in inventories, this could mean that supply is exceeding demand, which in turn could lead to lower oil prices.
  • Technical analysis. Technical analysis is an effective method of predicting future prices by analyzing historical market data. Traders use various indicators and charting models to identify trends and possible entry and exit points. For example, a trader may use indicators such as moving averages to identify a trend, and support and resistance levels to identify potential entry or exit points for a trade.
  • Swing Trading. This strategy is suitable for those who prefer to hold positions for several days to several weeks, trying to profit from larger market fluctuations. Swing traders often use a combination of fundamental and technical analysis to make trade decisions.
  • News-based strategy. This strategy is based on the price reaction to news events. Oil prices often react to geopolitical news, economic data and other events. For example, if a major geopolitical conflict is announced in an oil-exporting country, a trader may expect an increase in oil prices and open a long position.
  • Hedging strategy. Hedging is an effective strategy used to reduce the risk of loss from adverse price changes. Let’s say a trader has a long position in oil and wants to protect himself from a possible price decline. A trader can take a short position in oil futures contracts to reduce potential losses from falling prices. If the price of oil falls, losses are offset by profits from a short position in futures.
  • Use of derivatives. Contracts for difference (CFDs) and oil futures allow traders to profit from both rising and falling oil prices without owning the physical asset. This adds flexibility to your trading strategies.
  • Seasonality in oil trading. In the summer, when demand for gasoline increases due to road travel, oil prices may rise.
  • Technological tools. Advances in technologies such as artificial intelligence and algorithmic trading are opening up new opportunities for market analysis and trade decision-making.

Risk management in oil trading

  • First, you need to determine your willingness to accept risk on each trade. You should risk no more than 2% of your capital on a single trade. This will help limit potential losses and protect your capital from a series of losing trades.
  • Another risk management tool is the use of stop losses. By setting a stop loss level, a trader determines the point at which the position is automatically closed, limiting potential losses.
  • In addition, it is important to always monitor the size of your positions. By trading more contracts, you can increase your profit potential, but also your risk level. Make sure your position size is appropriate for your risk level.
  • Oil trading is not only market analysis and strategy, but also continuous self-education and development. Success in trading requires time, patience and perseverance, as well as a willingness to adapt to rapidly changing market conditions. It is important to approach oil trading with realistic expectations and strive for continuous self-improvement and learning.