What is the Oil Code in Forex? Which Forex Platforms Trade Crude Oil?

The oil code in forex is also one of the quite popular trading codes and is chosen by many investors. However, not everyone can trade effectively with this oil code. So, what exactly is the oil code in forex? What are the ways to trade most effectively with this oil code? If you are a new investor or a trader who needs to learn more about this trading code, let’s explore the details in the following article with Forex.

What is the Concept of Crude Oil?

Crude oil is one of the most impressive natural resources, extracted by drilling into the Earth’s core with huge drilling rigs. Crude oil is extracted along with other resources like natural gas and saltwater. Afterward, it is processed and refined into various products with different uses, including fuel and plastic.

The amount of crude oil in the world is considered to be extremely limited because it is a natural resource that originated millions of years ago. Crude oil is formed from the remains of prehistoric algae and plankton that drifted to the ocean floor, mixed with mud beneath, seeped into sediment layers, and heated over millions of years until it became a liquid. This is also why crude oil is a non-renewable energy source and cannot be synthesized; once the current supply is depleted, it will take millions of years to replenish.

Crude oil is drilled and extracted from many different locations around the world. However, if you want to invest, there are currently two standard types of oil that you should particularly pay attention to:

• Brent Oil (Brent Crude Oil)
• WTI Oil (WTI Crude Oil)

Brent Crude Oil

Brent is the main standard oil found in Europe, Africa, and the Middle East. Its original name referred to crude oil extracted from 15 different fields in the North Sea. However, today only four fields are widely recognized: Brent, Forties, Oseberg, and Ekofisk.

Brent oil is much heavier than other types of oil and, consequently, contains more impurities. Therefore, this type of crude oil requires more time and effort to process and refine into valuable fuels such as gasoline or diesel, leading to higher costs compared to the oil in Vietnam and the United States. However, Brent is still considered one of the most important benchmarks for crude oil trading because approximately 66% of oil contracts worldwide use Brent as the reference price. Additionally, this crude oil is produced offshore, so international transportation costs are much lower.

Brent crude oil is primarily traded on the Intercontinental Exchange (ICE).

WTI Crude Oil

WTI oil is a near-perfect blend of crude oil extracted from wells across the United States and transported to Cushing, Oklahoma. This crude oil is widely regarded as high quality due to its “lighter” and “sweeter” characteristics. In contrast, Brent crude oil requires more energy to process and refine into valuable petroleum products.

On the other hand, since WTI oil is primarily produced from wells on land, its distribution and sourcing are more challenging and require higher transportation costs. This is one of the main reasons why WTI, despite being of higher quality than other types of crude oil, is mainly used in the domestic U.S. market. The high distribution costs make WTI nearly impossible to compete with Brent in terms of price. This is why Brent is more favored in the international market.

WTI crude oil is primarily traded on the New York Mercantile Exchange (NYMEX).

How to Trade Crude Oil

As mentioned above, you can trade crude oil online on ICE or NYMEX using spot contracts or futures contracts. However, these forms of trading are still considered high risk. Therefore, individual traders with limited capital often earn profits by trading the Oil Price Spread through Contract for Difference (CFD).

Spot Contracts

A spot contract is essentially an agreement that specifies the current market price of crude oil. Trading spot contracts means you will buy and sell barrels of oil on the spot market and execute the transactions in the contract. If you sell at a higher price, you will make a profit. If you sell at a lower price, you will incur a loss.

Futures Contracts

Trading crude oil futures contracts is one of the types of agreements between you and a counterparty to buy and sell a specific amount of physical crude oil at a predetermined price on a specific delivery date in the future. Each contract typically involves around 1,000 barrels of oil and will be settled at a future date (up to 9 years).

Companies at the bottom of the supply chain for these fossil fuels often prefer to trade crude oil through futures contracts because they need to secure sufficient supplies at lower prices. By doing this, even if oil prices rise in the future, they can still purchase oil at the agreed-upon price in the contract.

Contract for Difference (CFD)

Trading crude oil through CFDs is typically for large companies that need to buy and sell actual barrels of oil. Although individual traders can also participate in these transactions, the margin requirements are often higher compared to the limited capital of a typical retail trader.

However, this does not mean that you cannot participate in specific steps to trade crude oil online. Retail traders are always welcome to trade crude oil by using Contract for Difference (CFD), which is more suitable for their budget.

CFD trading essentially involves trading on the price difference of a trading instrument, in this case, the price of crude oil. Moreover, engaging in CFD trading allows you to speculate and see whether oil prices are rising or falling, so you can trade crude oil online with much smaller lots compared to the contracts mentioned earlier.

For example, the volume for trading in spot contracts and futures contracts is typically calculated as 1,000 barrels per lot. However, with CFD trading, you can trade crude oil with as little as 25 CFD contracts. This is essentially like trading 25 barrels of crude oil.

See more: Top Factors affecting exchange rates.

Forex Platforms for Trading Crude Oil

There are currently many Forex platforms offering crude oil trading. However, finding one of the most reputable and high-quality Forex platforms is not easy. So, which Forex platform is currently the best for investors to explore crude oil trading?

XM

XM is currently a very reputable and high-quality Forex platform that every investor is familiar with. Not only does it provide high-quality, reliable services, but XM also offers a variety of trusted trading products.

XM offers CFD trading on crude oil with a low spread of up to 0.05 pips and a minimum margin rate of 1.5%. You can trade Brent crude oil with a minimum quantity of 100 barrels. For WTI crude oil, you can also engage in trades on a standard account with a minimum trading volume of 100 barrels and on a mini account with a minimum volume of 10 barrels.

FXTM

FXTM is also one of the most well-known platforms for reliable and high-quality Forex oil codes today. You can trade CFDs on FXTM for both Brent crude oil and WTI crude oil using spot contracts, with a minimum volume of 100 barrels. Trading spot Brent crude oil is done with an average spread of 5 pips when using FXTM ECN and FXTM ECN MT5 accounts. The FXTM Standard account offers the highest average spread (9 pips), while FXTM Zero MT4 has the highest average spread (10 pips).

Brent Crude Oil was trading at 1:52. For trading WTI Crude Oil spot contracts, you earn an average spread of 4 pips with your FXTM ECN and FXTM ECN MT5 accounts.

The FXTM Standard and FXTM Zero MT4 accounts offer slightly higher average spreads of 9 and 10 pips, respectively. You are also offered leverage up to 1:49 when trading WTI Crude Oil with FXTM.

FBS

One of the reliable and high-quality choices for Forex oil codes that investors can select is FBS. At FBS, you can engage in CFD trading on both Brent of the United Kingdom and WTI of the United States with FBS Standard, Cent, Micro, and Zero Spread accounts.

The typical spread for crude oil trading is around 2 pips for all accounts. Meanwhile, the leverage ratio on the platform will depend on the type of trading account you are using. For FBS Standard, Micro, and Zero Spread accounts, the maximum leverage is 1:3000. However, the FBS Cent account only offers a maximum leverage of 1:1000. Additionally, FBS charges a commission fee of $15 for Cent accounts and $25 for Standard, Micro, and Zero Spread accounts.

HotForex

You can trade crude oil online at HotForex using both spot contracts and futures contracts, depending on your trading goals and specific skills. The leverage for trading crude oil at HotForex is up to 1:66, with a minimum volume of one barrel.

In addition to the spot contracts provided at HotForex, you can also trade Brent crude oil and WTI crude oil futures contracts with a minimum spread of 0.03 pips and a minimum volume of 100 barrels. Additionally, the platform offers very reliable and competitive fee structures, and the leverage for trading crude oil futures at HotForex is up to 1:100.

Oil Codes in Forex

To understand what oil codes in Forex are, you need to be able to answer the following questions thoroughly and knowledgeably

Factors Affecting Crude Oil Codes in Forex

Crude oil trading is currently one of the most effective investment methods that offers significant benefits for investors. However, the crude oil market is also prone to frequent fluctuations. One of the key factors that influence the price of crude oil in forex trading includes:

• Supply and Demand: Crude oil prices tend to rise when supply decreases and demand increases, and conversely, the price drops when supply increases and demand decreases.
• Political and Economic Instability: Political and economic instability can significantly affect crude oil prices, as uncertainty in key oil-producing regions can disrupt supply.
• Strength of the US Dollar: Since oil is traded in US dollars, a stronger US dollar typically leads to higher crude oil prices, while a weaker dollar often results in lower prices.

How to Trade Crude Oil on Forex Platforms

Many investors are eager to learn how to trade crude oil on Forex platforms. As you may know, each Forex platform may have different methods and procedures for trading crude oil. Here’s an overview of how to approach trading crude oil on various Forex platforms.

Most Forex brokers support online trading, making it easy for investors to register accounts and carry out buy/sell transactions. When trading crude oil, investors should be aware of the specific trading hours of Forex brokers to ensure they trade during the most effective times.

Brent Crude Oil	WTI Crude Oil
Winter: 7:00 AM Monday to 4:00 AM Friday (GMT+7) Summer: 8:00 AM Sunday to 5:00 AM Friday (GMT+7)	Winter: 5:00 AM Sunday to 4:00 AM Friday (GMT+7) Summer: 8:00 AM Sunday to 5:00 AM Friday (GMT+7)