Oil futures contracts allow you to buy or sell a barrel at a set price for future delivery. This market is very liquid and used by energy professionals, hedge funds and financial institutions. “Oil” goes beyond what you put in your car, and understanding this complex market takes more than waiting to fill your tank until your local gas station’s prices dip. Just like any investment, supply and demand play a role in how much oil is worth. For example, the Russian invasion of Ukraine in February 2022 caused oil prices to jump over concerns about global supply.

After being extracted from the ground, crude oil is processed and used in many different petroleum products (the term “petroleum” is often used interchangeably with “oil”). She has covered personal finance and investing for nearly 20 years, and was a senior writer and spokesperson at NerdWallet before becoming an assigning editor. Arielle has appeared on the «Today» show, NBC News and ABC’s «World News Tonight,» and has been quoted in national publications including The New York Times, MarketWatch and Bloomberg News. This may influence which products we review and write about (and where those products appear on the site), but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research. Our partners cannot pay us to guarantee favorable reviews of their products or services. In addition, as the price of oil increases, each barrel that’s produced becomes incrementally more profitable for the oil company.

Trading Zinc CFDs

Luckily for anyone new to investing, there’s a whole myriad of online brokers that make venturing into any market easy and straightforward. One such multi-asset platform is eToro, through which you can gain exposure to CFD oil trading. The global balance between oil supply and demand is the most critical price determinant. Seasonal variations, industrial growth, and transportation needs contribute to demand fluctuations. In terms of fees, ETFs stand out for their simple pricing and lack of leverage, which is ideal for passive exposure. Futures contracts involve order execution commissions, margin calls and sometimes complex rollover fees.

Metrics that matter for risk and return in trading

Flexibility and continuous learning are key to maintaining profitability over the long term. Crude oil is known for its volatility, which means traders must adopt sound risk management practices to protect their capital. There is no leverage on stocks and ETFs, but it is present on futures and CFDs.

• Investors can also gain exposure to oil by purchasing related equities directly, or through energy-sector ETFs and mutual funds.
• Always review product costs and use risk-management tools, especially when using leverage.
• Overleveraging can quickly lead to large losses, especially in a volatile market like crude oil.
• They are suitable for longer-term investors who prefer less complexity compared to direct futures trading.

How We Make Money

• Traders monitor news feeds closely to enter or exit positions based on breaking news.
• Buying shares in major oil companies is one of the most direct ways to gain exposure to the oil market.
• Our estimates are based on past market performance, and past performance is not a guarantee of future performance.
• ETN returns are not subject to tracking error, but pose counterparty risk, because they are unsecured debt obligations.

Rates, terms, products and services on third-party websites are subject to change without notice. We may be compensated but this should not be seen as an endorsement or recommendation by TradingBrokers.com, nor shall it bias our broker reviews. Whilst we try to keep information accurate and up to date, things can change without notice and therefore you should do your own research. Crude oil markets are dynamic, with price behavior often changing due to evolving fundamentals and sentiment. Successful traders constantly monitor market conditions, adjust their strategies accordingly, and stay updated on relevant developments.

Regardless of the product you are considering, it is essential to fully understand the mechanisms and risks involved, including volatility, leverage and potential capital loss. Understanding contract specifications is critical in crude oil futures trading, where expiration dates, margin requirements, and lot sizes dictate market positioning. Price movements are heavily influenced by major catalysts—OPEC+ decisions, U.S. Energy Information Administration (EIA) reports, and global demand forecasts—all of which can trigger volatility. Traders often rely on technical indicators such as moving averages, MACD, and Bollinger Bands to detect momentum shifts and trend formations.

This path may be the best option for investors, because they can profit when oil rises but also when the company increases oil production, so they’re not just stuck relying on the oil price alone. That said, it’s key to understand the dynamics of the oil industry, and closely monitor key indicators that can help you with informed investment decisions. It’s also crucial to diversify investments and consider other asset classes to mitigate any risks. Oil prices are set globally in a variety of spot and futures markets for crude as well as related products by market participants, including producers, consumers, short-term speculators, and longer-term investors.

Oil stock mutual funds

Trading crude oil online provides flexibility through various financial instruments. Futures contracts, widely traded on major exchanges, represent 1,000 barrels each and offer direct exposure to oil price movements. With millions of contracts changing hands daily, they are a preferred choice for speculators and hedgers due to their liquidity and around-the-clock trading. For those looking for a more accessible alternative, contracts for difference (CFDs) allow traders to speculate on price changes without owning the asset, offering smaller contract sizes and lower capital requirements. Exchange-traded funds (ETFs) provide another option, tracking crude oil prices and offering an indirect way to invest in the market, though they are subject to risks like contango and backwardation.

Setting stop-loss and take-profit levels helps protect capital from excessive downside moves, while position sizing ensures exposure remains in line with market volatility. Diversification—whether through different asset classes or trading instruments—reduces the impact of unpredictable shifts in oil prices. Staying ahead of macroeconomic events, from OPEC+ decisions to supply disruptions, is equally critical, as sudden geopolitical or economic developments can trigger sharp, unexpected price moves. Futures are more advanced than investing in oil stocks or funds and should be approached with caution. Futures are a way for a producer to lock in the price of what they are selling in advance — and for the buyer to lock in the price of what they are purchasing. Oil futures are contracts in which two parties agree to exchange a set amount of oil at a set price on a set date.

Margined FX and contracts for difference are complex leveraged products which carry a high level of risk and can result in losses that exceed your initial investment. Breakout traders seek to capitalize on sharp moves after oil prices breach established support or resistance levels. This strategy requires quick decision-making and is best suited for volatile market conditions. In terms of liquidity, oil futures (such as those listed on the NYMEX or ICE) are among the most liquid instruments and are popular with professional traders.

The iShares Global Energy ETF (IXC) provides exposure to the largest energy companies globally. (SHEL), TotalEnergies (TTE), ConocoPhillips (COP), BP Plc (BP), and Enbridge Inc. (ENB). Here are five different ways to invest in oil, from direct ways to the more indirect.

What makes oil an attractive investment for many investors

Crude oil production is heavily concentrated in politically sensitive regions such as the Middle East. Any conflict, sanctions, or instability in these areas can lead to significant price movements due to concerns about supply disruptions. The idea with futures trading is that you never actually end up with the oil yourself. There is usually a healthy market of buyers who will take a futures contract off your hands.

How to Invest in Oil: A Beginner’s Guide

Buying shares in major oil companies is one of the most direct ways to gain exposure to the oil market. TotalEnergies, ExxonMobil, BP and Chevron are benchmark stocks listed on the world’s major stock exchanges. Investing in oil isn’t just for the rich, and it can be fairly affordable. Several well-known oil stocks frequently trade for under $100 a share.

U.S. and overseas crude refiners are the sole focus of the VanEck Vectors Oil Refiners ETF (CRAK). While energy prices tend to be volatile, the markets setting them are highly liquid, and market participants are typically well-informed. Patterns such as head and shoulders, triangles, flags, and double tops or bottoms are frequently observed in crude oil charts. Recognizing these patterns early can offer valuable insights into potential breakout or breakdown How to buy crude oil scenarios. Support and resistance are key price levels where oil tends to stop and reverse direction. Identifying these zones helps traders set entry points, stop-loss levels, and profit targets.

This leverage allows you to increase your exposure, but also your potential losses. CFDs often offer adjustable leverage, which allows you to better control your level of risk. ETFs (Exchange Traded Funds) allow you to invest in a basket of stocks or contracts related to oil. Some ETFs directly track Brent or WTI price indices, while others focus on large companies in the energy sector.

But navigating oil’s notorious price swings demands disciplined risk management, making stop-loss strategies and position-sizing non-negotiable for those looking to stay ahead in this fast-moving market. Trading crude oil requires a combination of market knowledge, technical expertise, and emotional discipline. Whether through futures, CFDs, ETFs, or oil-related stocks, traders must carefully assess the risks and opportunities presented by this volatile yet rewarding commodity. With the right preparation and mindset, traders can navigate the complexities of crude oil trading and potentially achieve consistent results. Crude oil remains one of the most actively traded commodities, offering both risks and opportunities for investors.