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Oil and gas prices rise when the economy is doing well since more energy is needed to produce goods and services. It also goes up in price when there is a supply disruption: wars, terrorist attacks, a significant spill in a prominent well. Oil falls in price when the economy downturns due to a narrower need to produce the goods and services we consume. It also drops in price when production (supply) increases or stocks increase. With the coronavirus pandemic, we've seen several of these effects, altogether. These are just a few examples that show that volatility in the price of oil can be massive, and price levels depend on many factors. This is why investing in oil through CFDs can become a lucrative activity.  Below, we explain the process to invest in oil & gas through CFDs from Japan, for investors with little capital [Little capital = less than 100-200 US Dollars]. We added above a list of trading platforms if you wish to start trading oil-related financial assets straight away.

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 (such as plastic), fertilisers, and even medicine. Due to this raw material's versatility, it is the basis, heart, soul and blood of the world economy: For the better and for the worse, the world would not be the same if oil wasn't available. This is why the oil price's impact on the global economy is massive. It is a two-way correlated relationship, and economic data is directly related to oil price and vice versa.

If a regular investor in Japan wants to invest in Oil or Gas, they can't just go to a rig asking to share the profits. The easiest way to start trading in the oil markets is via CFDs [We will note a brief explanation about what that means later]. The two most common methods of investing with CFDs are Brent Oil and WTI (West Texas Intermediate), the two central price measurement systems: 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.

As the reader of this article probably knows, CFD stands for Contracts for Difference. This financial instrument allows 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 price of oil, without the need to trade in physical oil, in other words, to travel to Texas or Saudi Arabia and buy barrels of oil. It is then obviously an efficient way to invest in oil if you understand 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 Japan?

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 AvaTrade have Online Apps that allow you to trade Oil & Gas Financial Assets in a straightforward way

Brokers like AvaTrade have Online Apps that allow you to trade Oil & Gas 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 4 Brokers that were detailed at the beginning of this article is a process that is carried out online and takes only a few minutes.

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

  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 a proof of address (electricity, water bills, etc.).

  4. Once the account has been approved and is ready to be used, you have to 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 essential to mention that most Online Brokers allow you to use a Free Demo of their trading platform. In other words, a trader can open a Demo account, test the platform, and then decide whether to deposit funds or not. And remember: To open a Real Money account, with some Brokers only 1 Dollar is required.

How do you invest with an Oil CFD?

Trading platforms offered by Online Brokers allow investing in this type of instruments only through optimised apps that grant access to financial markets. Most platforms resemble a social network or any other app on a mobile device: Apps are designed so that the investor can learn and start trading very quickly, without the need for much prior knowledge. There are three basic ways to invest in oil and gas CFDs:

  1. CFDs on WTI or Brent Oil: CFDs are the perfect instrument for all traders since they allow trading oil prices with a shallow capital requirement. The physical raw material is never purchased; it is only a speculative bet on the oil price.

  2. CFDs on ETFs: Another option is to trade CFDs on listed funds or ETFs. In the case of crude oil, there is an infinite number of options, among others is 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.

  3. CFDs on 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 CFDs with exposure to oil [or to any other raw material or stock on the Stock Market], a trader 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.

Done: you are officially an investor in energy-related financial instruments.

Best Brokers for Oil & Gas Financial Assets available in Japan

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.



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