How to Trade Oil: Understanding 4 Investment Options in 2025

Why is crude oil an attractive asset for investors

Crude oil has become an investment option that attracts investors worldwide due to its high volatility and excellent liquidity. The oil market is driven by continuously changing supply and demand factors, making this asset appealing to those seeking investment returns.

Crude oil is the most traded commodity in the world not only for speculation but also for hedging, diversification, and inflation risk mitigation.

Crude Oil Courses: Brent and WTI

The international crude oil market has two main benchmark standards: Brent Crude (Brent Crude) and West Texas Intermediate (WTI)

Brent Crude:

• Extracted from the North Sea in Europe
• Used as a global trading standard, covering about two-thirds of the market
• Low sulfur content (approximately 0.37%)
• Traded on the ICE (Intercontinental Exchange)

WTI Crude:

• Produced from sources in the United States, especially Texas, Louisiana, and North Dakota
• Standard benchmark for oil prices in North America
• Sulfur content is lower (about 0.24%)
• Traded on the NYMEX (New York Mercantile Exchange)

Four Types of Oil Trading Strategies

1. Speculating via CFDs (Contracts for Difference)

This method is the most popular among current investors because it does not require owning actual oil or committing to long-term contracts.

Examples of CFD oil assets:

• USOIL (WTI): The US standard for oil trading, widely traded
• UKOIL (Brent): The global benchmark, especially in Europe, Asia, and Africa

Advantages:

• High leverage allows for increased capital efficiency
• No need to store physical assets
• Can trade in both bullish and bearish markets (Short selling)
• Lower initial investment
• Can trade outside regular market hours

Disadvantages:

• High risk due to leverage use
• Potential loss of initial capital

Suitable for: Traders with limited funds, experience with leverage, and the ability to monitor markets closely

2. Buying futures contracts (Futures)

Futures contracts are standardized agreements to buy or sell oil at a future date, with a predetermined expiration date.

Examples of contracts:

• WTI (CL) contract: At NYMEX, 1,000 barrels, priced in US dollars per barrel
• Brent (BRN) contract: At ICE, 1,000 barrels, priced in US dollars per barrel

Advantages:

• High liquidity, quick market entry and exit
• Opportunities for profit from high volatility
• Leverage can enhance returns
• Effective hedging tools (Hedging)

Disadvantages:

• Contracts have fixed expiration dates, requiring careful management
• High risk for beginners

Suitable for: Experienced investors who can manage expiration dates and have medium to high capital

3. Investing in oil company stocks

Since oil impacts every corner of the global economy, many oil companies offer indirect investment opportunities.

Examples of oil stocks:

• Thailand: PTT Public Company Limited (PTT) and PTTEP (PTTEP)
• USA: ConocoPhillips (COP) and Occidental Petroleum Corporation (OXY)

Advantages:

• Receive dividend income
• Balance between returns and risk
• Easy to trade through regular stock exchanges
• No need to manage expiration dates

Disadvantages:

• Stocks may not track oil prices directly
• Also influenced by company-specific factors

Suitable for: Retail investors seeking simplicity, with moderate funds, and interested in dividend income

( 4. Physical oil trading

This method involves sourcing, storing, and transporting actual oil.

Process:

• Specify the type of oil )Brent or WTI or refined products(
• Find suppliers or brokers
• Arrange storage facilities )certified tanks###
• Manage transportation with specialized vehicles

Advantages:

• Ownership of real assets
• Hedge against inflation
• No expiration date

Disadvantages:

• Very high storage costs
• Requires large infrastructure
• Complex regulations and logistics

Suitable for: Large companies using oil for their actual operations, such as industrial plants, transportation firms, or refineries

Factors Influencing Oil Prices

1. Supply and demand: The fundamental factor. When demand exceeds supply, prices tend to rise.

2. OPEC and OPEC+ decisions: Production adjustments by member countries significantly influence the market.

3. Geopolitical events: Conflicts, sanctions, and political instability can disrupt oil supply.

4. Economic factors: GDP growth, inflation rates, and currency volatility.

5. Inventories: Oil storage levels, especially in major consuming regions.

6. Weather conditions: Severe weather events like storms can disrupt production and transportation.

7. Currency volatility: Since oil is traded in US dollars.

Summary

Trading oil in 2025 offers many options, each with its advantages and disadvantages. Investors should choose based on their capital level, risk appetite, and investment objectives. Most importantly, select a reputable broker regulated by appropriate financial authorities to protect your funds.

Risk warning: Investing in oil, especially futures and CFDs, carries high risk and may not be suitable for everyone. Study the information thoroughly and consult with an investment advisor before making decisions.