Commodities · Energy
Crude Oil
Crude oil is one of the world's most important commodities and a major influence on inflation and some currencies. Here's how oil is priced, traded and affected by supply and demand.
Updated · FXPIPS Editorial Desk · Educational content, not investment advice
Data
WTI and Brent price history
Daily spot prices from the U.S. Energy Information Administration, retrieved from FRED.
Drivers
What moves oil prices
01
OPEC+ production decisions
The Organization of the Petroleum Exporting Countries and its partners coordinate output policy. Changes to production targets can shift expectations for global supply.
02
Global economic growth
Oil demand is closely linked to transport, industry and trade, so the outlook for major economies influences expected consumption.
03
Inventory data
Weekly US inventory figures from the Energy Information Administration show whether stocks are building or drawing down, which markets watch closely.
04
Geopolitical events
Conflicts, sanctions or disruptions in producing regions and shipping routes can raise concerns about supply.
05
US dollar
Oil is priced in dollars internationally, so a stronger dollar makes it more expensive in other currencies, which can affect demand.
06
Non-OPEC supply
Output from producers such as the United States, Canada, Brazil and others adds to supply and can offset changes elsewhere.
What "the oil price" refers to
There isn't a single oil price. Crude oil varies in quality and location, so the market uses benchmark grades as reference points. When news reports quote "the oil price", they usually mean the price of a front-month futures contract on one of the two main benchmarks, quoted in US dollars per barrel. One barrel is 42 US gallons, or about 159 liters.
WTI and Brent
| Benchmark | Main exchange | Pricing basis | Standard futures contract |
|---|---|---|---|
| West Texas Intermediate (WTI) | NYMEX (CME Group) | US crude, physically delivered at Cushing, Oklahoma | 1,000 barrels |
| Brent | ICE Futures Europe | North Sea crude, cash-settled against a Brent index | 1,000 barrels |
WTI is the main reference for US crude, while Brent is widely used to price oil traded internationally. The two usually move in the same direction, but the gap between them (the spread) changes with transport costs, regional supply and demand.
How oil is traded
Futures are the core of the oil market. A futures contract is an agreement to buy or sell a set quantity at a set price on a future date. Each contract has an expiry, so traders who want to keep a position must "roll" from the expiring month to a later one. Prices for different delivery months can differ significantly.
Retail CFDs and spread bets on oil usually track a futures contract. Some are based on a specific month and expire, while others roll automatically and may apply an adjustment when they do. Check your broker's documentation.
Futures trade on electronic exchanges nearly 24 hours a day on weekdays, with short daily breaks. Trading hours for retail products depend on your broker.
Contract basics
Retail brokers often define one lot of oil as 1,000 barrels, though smaller sizes are common.
Illustrative example: you buy 100 barrels of WTI at $75.00 and sell at $76.50. Gross profit = (76.50 − 75.00) × 100 = $150. If the price fell to $74.00, the loss would be (75.00 − 74.00) × 100 = $100.
The notional value at entry is 100 × 75.00 = $7,500; at 10:1 leverage, the margin required would be $750. The Position Size Calculator can help you size a position so a stop-out costs a planned amount.
Oil and currencies
Oil prices can affect the currencies of major producers and importers. The Canadian dollar and Norwegian krone are often discussed in connection with oil because energy exports matter to those economies. Oil also feeds into inflation, which influences central bank policy. These links are tendencies and can weaken or reverse. See Inflation and forex and Currency correlation.
Risks
- High volatility: supply shocks and policy announcements can cause sharp moves.
- Futures mechanics: expiry and roll can create price jumps unrelated to market direction. In April 2020, the expiring WTI futures contract briefly settled below zero, a widely reported example of how extreme these dynamics can become.
- Gaps after weekends or major news can push prices past stop-loss levels.
- Leverage magnifies gains and losses.
Trading oil carries a substantial risk of loss. This page is educational only and is not investment advice.
This page is for education only and is not a recommendation to buy or sell any instrument. Leveraged products such as CFDs and futures can lose you more than you expect; check your broker's contract specifications and your local regulations.