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Oil CFDs: Volatility at its best


Crude is an unrefined oil. It is extracted from hydrocarbon deposits and other organic materials and refined to produce usable products, such as gasoline, diesel, petrochemicals (plastics, basically), fertilisers, and even medicine. This implies that this raw material's versatility is the basis, heart, soul and blood of the world economy: For the better and worse, the world would not be the same if oil wasn't available. This is why the oil price's massive impact on the global economy. It is a two-way correlated relationship; economic data affects oil prices and vice versa.


If a regular investor in China wants to invest in Oil or Gas, they can't just go to a rig with a bag of cash asking to share the profits. The easiest way to start trading in the oil markets is via CFDs [We will briefly explain what CFDs mean later]. The two most common investment instruments with CFDs are Brent Oil and WTI (West Texas Intermediate). The core price measurement units are crude oil barrels available on the main energy markets. A trader can also operate on this raw material through gasoline's prices or the commodity known as Heating Oil, which is oil but refined, and ready to be used.


CFD stands for Contracts for Difference. They are financial instruments allowing you to trade changes in the price of futures and options, but with the simplicity of not needing to manage complicated oil contracts. A CFD on oil, then, replicates the oil barrel price, without the need to trade in physical oil, in other words, to travel to Texas or Saudi Arabia and acquire the equivalent in barrels. It is then an efficient way to invest in oil if you believe that trading on the rise and fall of the price of this raw material might be a good option for your investment portfolio.



What's the minimum amount to Invest in Oil-related financial instruments from China?


Many Brokers do not have a minimum deposit (or a meagre amount of money). Many others do not charge a commission for the purchase and sale of Commodity CFDs. So, you do not need to be an investment banker to start trading oil-related assets.

Brokers like eToro have Online Apps that allow trading of International Financial Assets in a straightforward way

Brokers like eToro have Online Apps that allow trading of International Financial Assets in a straightforward way

How to open an Account to Invest in Oil and Gas CFDs


Opening an investment account with any of the brokers displayed before is a process that is carried out online and takes only a few minutes. To start trading oil assets, you will have to:


  1. Choose the trading platform that suits you best (We have certified with the ones that we have included that accept clients from China).

  2. Depending on the Broker, accounts may be opened in US Dollars (USD), Euros (EUR), Pound Sterling (GBP), Swiss Franc (CHF), Australian Dollar (AUD) as the base currency. Most of them offer the option to open the accounts in either Dollars or Euros.

  3. The Broker will require you to upload an ID or passport and proof of address (electricity, water bills, etc.).

  4. Once the account has been approved and is ready to be used, deposit funds. The methods of depositing and withdrawing money are usually Credit Cards, Bank transfers or e-Wallets (Like PayPal, PaySafe, Skrill, SafetyPay, Neteller, among many others).


It is vital to remark that most trading platforms allow you to use a free demo of their trading platform. In other words, you may open a demo, test the platform, and then decide whether to deposit funds or not. And remember: To open a real account, some brokers have no minimum deposit.



How do you invest with an Oil CFD?


The trading platforms allow investing in these instruments through optimised apps that grant access to financial markets. Most platforms resemble a social network or any other app on a mobile device: Their design has been engineered so that the investor can learn and start trading very quickly, without the need for much prior financial knowledge (Not recommended, though). There are three basic ways to invest in oil and gas CFDs:


  1. CFDs on WTI or Brent Oil: This way implies that you acquire a CFD, that is, the derivative on the equivalent of an oil barrel. The physical raw material is never purchased; it is only a speculative bet on the oil price.

  2. ETFs: Another option is to trade CFDs on listed funds or ETFs. By investing this way, you acquire a portfolio of companies and financial assets related to energy products. Which one to choose? In the case of crude oil, there is an infinite number of options: the United States Oil Fund (USO), for the barrel of WTI, or the Brent Oil Fund (BNO) for the barrel of Brent, but there are many other options. Also, many ETFs invest in companies that drill and refine oil and oil-related products.

  3. Stocks and Shares: The last option is to trade CFDs on shares of companies directly or indirectly related to crude oil—for example, BP, Shell, Exxon, Pemex, or Total shares, among many others.


To acquire any of these financial instruments related to oil, an investor has to:


  1. open an account with an Online Broker,

  2. deposit money with any of the available payment methods,

  3. Search for "Oil" or "Gas" on the Broker platform, choose the financial instrument, and

  4. press the "Buy" button.


And, done: you are officially an investor in energy-related financial instruments.

Best Brokers for Oil & Gas Financial Assets available in China

What are the risks of investing in oil? How can I benefit from its price volatility? This article is all about helping you get the trading experience you want.

TRADING

HOW TO INVEST IN OIL & GAS FROM CHINA

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