Crude oil is a raw material that makes up much of the essential fuels that we rely on, on a day-to-day basis. It is refined to produce many petrochemicals, such as diesel, jet fuel and gasoline, and comes in various grades, with the most commonly traded being light sweet crude oil. This is because its refining cost is relatively low and it is easy to refine, making it financially advantageous. It is also popular because it is traded on the New York Mercantile Exchange (NYMEX).

But why trade crude oil? The crude oil market is volatile, which means that investment can be risky, however, can be converted into significant profits if you do your research and understand the market’s climate. It is one of the largest commodity markets globally and is extremely liquid, and can offer investors vast opportunities to profit in a range of different market conditions. This article will explore the benefits of crude oil trading and will try to decipher whether crude oil is the future of oil trading.

Environmental benefits

With environmental concerns being at the fore-front of many of our minds, it’s no wonder that greater restrictions are being placed upon the refinement of oil, in an attempt to combat climate change, by reducing emissions. These new regulations mean that refiners are having to drastically cut the amount of sulphur used in multiple fuels.

Light sweet crude oil is a desirable grade because it naturally has a lower sulphur content than other forms of oil, meaning that during the refinement process it releases far fewer contaminants into the air. This is much of the reason for Asian refiners choosing to stock up on light sweet crude, attempting to avoid strict pollution regulations. Since the mission to combat climate change is more charged than ever, the future requires an adaptation of our emission usage and sweet crude oil could be the answer to this.

CFD trading

A contract for difference (CFD) is a deal between a CFD broker and an investor in which they exchange the difference in value of a commodity like oil, within a certain contractual timeframe. This allows you to speculate on the price movement of the commodity without having to own the underlying the asset.

Trading oil using CFDs can be advantageous because it can allow you to access the asset at a lower trading cost than if you were buying it outright. It gives you access to leveraged trading and liquidity. You can take advantage of this by exchanging with a CFD broker on an online trading platform, giving you access to commission free oil trading, on sites like https://www.plus500.co.uk/instruments/CL, for example.

Why trade sweet oil rather than sour?

If you’re left wondering what the difference is between sweet and sour crude oil, it’s actually fairly simple. Sweet crude gets its name from its low sulphur content, which is responsible for its sweetness, whereas sour crude oil has a far higher sulphur content, making it predominantly sour. As previously mentioned, sweet crude’s low sulphur content already gives it the advantage of being a more environmentally friendly option, but the benefits don’t end there.

The purity of both strains of oil actually differ significantly, with sour crude having a higher level of impurities than sweet. This increased level of impurity makes sour oil less financially effective because it makes it more expensive to refine than its sweet variant.

So, why could crude oil be the future of oil trading? Trading crude oil can offer unique profit opportunities for traders because of the high levels of volatility, particularly in the energy sector, which make it possible to take advantage of strong trends and short-term changes in the market. The market also has an impressive position globally, with regards to economic and political systems. All of its benefits considered, if you’re thinking about investing in oil, then crude oil and specifically light crude oil, could be a worthy commodity to choose.