What is the Crude Oil Differential Market?
A 'differential' is simply the difference between two markets.
In this case, it is the difference between the two most popular crude oil markets, Brent crude and US crude.
For example, if the underlying Brent crude market is priced at 6206¢ ($62.06) and the underlying US crude market is priced at 5039.5¢ ($50.395) then Financial Spreads might offer a Brent crude / US crude differential market of 1165¢ - 1168¢.
This means clients can spread bet on the difference between the two markets getting larger than 1168¢ or getting smaller than 1165¢
Put another way, it's a way of trading the relative performance of Brent versus US crude.
If you feel that Brent will perform better than its US counterpart you could spread bet on the differential to increase.
Likewise if you think US crude will be the stronger performer then you can spread bet on the differential to decrease.
This is the same as going long of one market and short of the other, although with a differential trade:
- There is only one trade and therefore it is easier manage
- The combined spread of two separate trades is wider. A single differential trade offers clients a tighter spread
Where Can I Spread Bet on Brent/US Crude Oil Differential?
A Financial Spreads account provides clients with a range of commodities markets including the Brent crude oil / US crude oil differential, the individual
Brent and US crude markets, gold and silver.
Where Can I Access Live Brent/US Crude Oil Differential Prices?
FinancialSpreads provides clients with real-time pricing on numerous markets such as Brent / US crude oil and an array of other commodities, stock markets, forex and stocks prices.
Where Can I Get Live Brent/US Crude Oil Differential Charts?
With Financial Spreads clients have access to real time charts for Brent / US crude oil and more than 1,000 other markets.
Along with multiple display styles, the package has an array of features. These include:
- Drawing tools and options e.g. Fibonacci Time Zones, Fans and Arcs
- Indicators and chart overlays e.g. Moving Average, Bollinger Bands, Stochastic etc.
- A host of different time periods e.g. 30 minutes, 2 hours, 1 month etc.
Example commodities spread betting chart:
A Guide to Financial Spread Betting on the Brent / US Crude Oil Differential
For example, let's imagine you go on Financial Spreads and the platform is showing a price of:
| Brent / US Crude Oil Differential Rolling Spot |
Sell
772.5 |
|
Buy
775.5 |
|
Here is a brief guide to how the market works...
| The Spread Betting Market | Brent Crude Oil / US Crude Oil Differential Rolling Spot |
| The Spread Betting Quote | 772.5¢ - 775.5¢ |
| This Means That | Now you can trade on the Brent / US crude oil rolling spot market to move:
 Higher than 775.5¢, or
 Lower than 772.5¢
This market is a Rolling market and so there is no settlement date for this spread bet. If you don't close your position and the session ends then your trade will automatically roll over into the next trading day.
Note that if a trade rolls over then you will normally either receive or pay interest for overnight financing depending upon whether you are betting on the market to fall or rise. For more details also see Rolling Spread Betting. |
| Traded Units | Trades on the Brent / US crude oil market are made in £x per cent.
Where a cent is 1¢ of the commodity market's price movement.
E.g. if the Brent / US crude oil market moves by 40.0¢ then you would lose or gain 40 multiples of your stake. |
| Trade Size | You decide how much you want to stake per cent, e.g. £3 per cent, £8 per cent, £10 per cent etc. |
| Simplified Trading Exercise | With that in mind, if you decided on a stake of £4 per cent and Brent / US crude oil changed by 35.0¢, you would win or lose £4 per cent x 35.0¢ = £140. |
Spread Trading Example - Taking a Long Position on the Brent / US Crude Oil Differential
Financial spread betting on the energy market to move higher
| You Now Choose to Go Long or Short |
Brent / US crude oil market moving:
Higher than 775.5¢? or
Lower than 772.5¢?
|
| You Might Choose to Go Long |
Higher than 775.5¢
|
| You Select Your Stake, Let's Say You Choose | £15 per cent |
| So Now What? |
- You win £15 for every cent that the Brent / US crude oil market moves higher than 775.5¢
- Your trade loses £15 for each cent that the Brent / US crude oil market goes below 775.5¢
|
| When You Go Long With a Spread Bet Your Trading Profits (or Losses) = | (Settlement Price - Opening Price) x stake |
| | |
| Trading Situation 1 |
| The Brent / US crude oil differential widens and the spread betting market becomes 782.9¢ - 785.9¢, i.e. the market moves to: |
|
782.9 |
|
785.9 |
|
| Lock in a Profit? | At this point, you could choose to leave your position open or close it and take a profit. In this example you opt to settle your trade by selling the market at 782.9¢. |
| Your Trading Profits (or Losses) = | (Settlement Price - Opening Price) x stake |
| (782.9¢ - 775.5¢) x £15 per cent |
| 7.4¢ x £15 per cent |
| Your Trading Profits (or Losses) = | £111.00 profit |
| | |
| Trading Situation 2 |
| The Brent / US crude oil differential shrinks and the spread trading market changes to 769.2¢ - 772.2¢: |
|
769.2 |
|
772.2 |
|
| Time to Restrict the Loss? | At this point, you can opt to let your position run or close it and restrict your loss. In this case you opt to close your bet and sell the market at 769.2¢. |
| Your Trading Profits (or Losses) = | (Settlement Price - Opening Price) x stake |
| (769.2¢ - 775.5¢) x £15 per cent |
| -6.3¢ x £15 per cent |
| Your Trading Profits (or Losses) = | -£94.50 loss |
Spread Betting Example - Taking a Short Position on the Brent / US Crude Oil Differential
Spread betting on the energy market to decrease
| You Choose to Go Long or Short |
Brent / US crude differential to go:
Higher than 775.5¢? or
Lower than 772.5¢?
|
| You Might Choose to Go Short |
Lower than 772.5¢ |
| You Choose How Much to Risk, Let's Say You Select | £10 per cent |
| What Happens Now? |
- Your trade loses £10 for each cent that the Brent / US crude oil market goes higher than 772.5¢
- You win £10 for each cent that the Brent / US crude oil market pushes lower than 772.5¢
|
| If You Are Speculating on a Market to Decrease Your Trading Profits (or Losses) = | (Opening Price - Settlement Price) x stake |
| | |
| Trading Situation 3 |
| The Brent / US crude oil differential pushes lower and the market is revised and is set at 759.5¢ - 762.5¢, therefore you'd see this on Financial Spreads: |
|
759.5 |
|
762.5 |
|
| Time to Take Your Profit? | At this point, you can decide to keep your bet open or close it, i.e. close your trade to lock in your profit. For this example, you choose to close your bet and buy the market at 762.5¢. |
| Your Trading Profits (or Losses) = | (Opening Price - Settlement Price) x stake |
| (772.5¢ - 762.5¢) x £10 per cent |
| 10.0¢ x £10 per cent |
| Your Trading Profits (or Losses) = | £100.00 profit |
| | |
| Trading Situation 4 |
| The Brent / US crude oil differential increases and the financial spread betting market is adjusted and moved to 777.9¢ - 780.9¢. I.e. the market moves to: |
|
777.9 |
|
780.9 |
|
| Close and Limit the Loss? | You could opt to leave your bet open or close it, i.e. close your position and limit your losses. In this instance you decide to settle your trade and buy at 780.9¢. |
| Your Trading Profits (or Losses) = | (Opening Price - Settlement Price) x stake |
| (772.5¢ - 780.9¢) x £10 per cent |
| -8.4¢ x £10 per cent |
| Your Trading Profits (or Losses) = | -£84.00 loss |
- Brent Crude Oil / US Crude Oil Differential market comments: example prices taken from FinancialSpreads as of 13 February 2015
- Investors could also choose to spread bet on the Brent / US crude oil differential in euros per cent and dollars per cent
Where Can I Practice Financial Spread Betting on Brent/US Crude Oil Differential?
FinancialSpreads.com offers investors the chance to try new ideas and theories by using a free Demo Account, demo markets include the Brent / US crude oil differential.
The Demo Account is not limited to one market; you are also able to practice using a wide range of indices, exchange rates, commodities and equities.
Open a CFDs and Spread Betting Demo Account
The information and comments provided herein under no circumstances are to be considered an offer or solicitation to invest and nothing herein should be construed as investment advice. The information provided is believed to be accurate at the date the information is produced.
Related Reviews and Guides
24 Hour Spread Betting
Investors can trade a range of popular financial markets 24 hours a day. The 24 hour markets include the FTSE 100, Germany 30, gold and crude oil. There are 30+ FX markets including EUR/USD, GBP/USD and...»
read more.
Differential Spread Betting
How and where to spread bet on differential markets. Plus an introduction to stock market and commodities differential spread betting, a worked trading example and...»
read more.
Crude Oil Differential Spread Betting
How and where to trade crude oil differentials using spread bets or CFDs. Plus what is a differential market, detailed trading examples and...»
read more.
Wall St 30 / Germany 30 Differential Spread Betting
Review of Wall St 30 / Germany 30 differential spread betting. How and where to trade the US / German stock market differential, a detailed trading example and...»
read more.
Wall Street 30 / UK 100 Differential Spread Betting
Guide to trading on the Wall Street 30 / UK 100 differential market including where to find live spread betting prices, a worked differential spread betting example and...»
read more.
Germany 30 / UK 100 Differential Spread Betting
How and where to trade the Germany 30 / UK 100 differential spread betting market. Plus a fully worked Germany 30 / UK 100 trading example and...»
read more.
Financial Spreads Tightens Forex Spreads
The highly competitive forex service comes with one point spreads on EUR/USD and EUR/GBP. There's 24 hour forex trading and now Financial Spreads has reduced the spreads on 30 forex markets. Forex investors can...»
read more.
You are here » "
Crude Oil Differential Spread Betting" » How and where to trade crude oil differentials using spread bets or CFDs. Plus what is a differential market, detailed trading examples and...»
Return to Top
