Compare the best brokers for trading Brent Oil. All brokers in this list are Authorised and regulated by the FCA.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
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What is Brent Crude?
Brent crude oil is a type of crude oil produced in the North Sea. Light and sweet (low sulfur content), Brent is a popular energy and is used to benchmark other crude products. Trading in Brent rivals that of the US West Texas Intermediate (WTI) crude.
Originally traded in the Petroleum Exchange London, Brent trading has since moved to the Intercontinental Exchange platform, also known as ICE.
A quick look at ICE’s brent homepage shows that trading in Brent is centered around futures contract. A future contract is a financial product based on some underlying prices with an expiry date. For Brent Crude futures on ICE, this underlying is garnered from the Brent Index.
Given that Brent Crude is an internationally important contract, brent trading is priced in US Dollars.
Where to find Brent-related news and forecasts?
To find out more about Brent Crude is to read about it regularly. For energy contracts, you need to pay attention to three things that will impact crude oil’s price movements:
- Supply and demand data (via regular data releases)
- Opec meetings
- Geopolitical events
Major news agencies such as Reuters and Bloomberg are the first port of call to any breaking news.
Also remember to look at data releases for the week ahead. This will give you some ideas about the forthcoming things that traders will be looking at. In most tables there will be a row of ‘expected value’ of the data. Note them.
For example, the Energy Information Administration (EIA) reports crude storage levels regularly (known as Weekly Petroleum Status Report). Sometimes, these data can impact crude prices significantly, especially when the data deviates from market expectations.
How to learn to trade Brent Crude?
Watching the brent crude contracts and learning its day-to-day behaviour is key. Remember, you do not trade markets. Rather, you trade your beliefs and understanding about the market.
Write down any pattern you think is relevant about the energy contract. Test these patterns against its past movements. Do they work? Is there any seasonal pattern?
Paper trade for a few months. Work out if the commodity is suitable to your trading strategy. Not all do. So select your universe carefully.
What are the majors risks and of trading Brent Crude?
The biggest risk from trading brent crude is that you are on the *wrong side* of the trend. When you realise this, abandon the trade as soon as possible. Do not hope that the market will turn in your favour – because it may not.
This is especially relevant to commodity contracts like Brent because prices tend to overshoot, such as during 2008 and 2016.
Many traders use stop losses strictly to prevent a losing trade from ballooning. You should do so too.
Another risk comes from Brent’s price pattern. In other words, when Brent is not ‘trending’ either up or down enough, it becomes harder to exploit price movements because there is insufficient distance between the entry and exit points.
The last point relates to extreme price moves. For Brent Crude, this revolves around oil-producing countries where there is a risk of geopolitical tensions. For example, if the US-Iran conflict deepens it will cause crude price to jump violently.
Can you invest in Brent Crude?
Brent Crude is a type of commodity. There is no dividend, earnings or share buybacks. Basically one buys crude oil hoping prices will appreciate. But if supply and demand are in equilibrium, prices may stagnant. Worse, if supply is greater than demand, crude prices can crash and stay low for years.
There are some crude oil-related ETFs such as ETFS Brent Crude (BRNT, factsheet here) which you can. These ETFs attempt to invest in brent crude futures.
A major problem with these ETFs is the rollover cost associated with selling expiring futures contract and buying new ones. This may eat into returns.
Can you make money trading Brent Crude?
You certainly can! However, you can also lose money quickly. Remember, Brent crude trading is based on futures, meaning that margin is low and leverage high. So you need to have the right strategy at the right time.
You need to deal with probability too. Nobody get it right every time. Sometimes you win, sometimes you lose. To win out in the long run, you have to cap your losses and max your gains.
Position size your trade in a way that even if prices move significantly against you the overall portfolio remains viable.
What moves Brent Crude prices?
On a longer term, prices will gravitate around supply and demand. On a short to intermediate-term,
- Investor expectations
- Market psychology
- Unexpected events.
all play a crucial role in determining Brent Crude prices.
In 2015-2016, for example, traders took fright from falling demand and oversupply of crude oil. Coupled with strengthening USD, this led to substantial Brent price weakness (see chart one above). Brent plunged from $110 to $30 in about 18 months.
What is interesting about this episode is that prices broke down ‘suddenly’ in 2014 and never recovered. The downtrend then overshoot to the downside and recovered sharply.
All of these movements were driven by market psychology. The longer the price trend, the more extreme market psychology becomes. Brent crude was caught in a self-reinforcing loop, which reinforced the downtrend until the trend became very oversold and rebounded sharply in a ‘V’-shaped fashion.
Brent Crude is a well-renowned trading classification for crude oil that is touted as a going price for the sale of oil throughout the world. Brent Crude is described as light due to its low density, and sweet due to its minimal sulphur content.
An oil CFD broker’s role is to serve as an intermediary for clients wishing to speculate by buy and sell a crude oil commodity derivative. Most of the time, an oil broker is a licensed securities trader that may work directly with an exchange or by proxy through a phone or internet connection. Quite often, the best brokers for trading Brent Oil – either working solo or as part of a firm – have at least one contact who works for an energy company; they will often negotiate with an oil refinery to garner a more attractive sale price. The same applies for both buying and selling Brent Crude futures.
Naturally, different forex brokerage firms will appeal to different people; for instance, ETX is the one of the largest MT4 broker in the UK, and their high-quality sentiment data and reliable trading platform is ideal for trading in high volume, especially with energy securities such as Brent Crude.
For those who are after the innovation that fresh blood can bring to the equation, Core Spreads has established a solid reputation within the energy securities market. Hardcore investors will relish this company’s tenacious want for helping big investors.
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