Guide to Crude Oil Differential Markets

Support: +44 (0) 203 301 0483 | support@financialspreads.com
Financial Spreads: Spread Betting and CFD Trading

Losses can exceed deposits
Differential Spread Betting on Crude Oil

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:

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:
Example commodities spread betting chart:

Commodities Spread Betting Charts



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 MarketBrent Crude Oil / US Crude Oil Differential Rolling Spot
The Spread Betting Quote772.5¢ - 775.5¢
This Means ThatNow you can trade on the Brent / US crude oil rolling spot market to move:

  Spread Betting Higher than 775.5¢, or
  Spread Betting 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 UnitsTrades 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 SizeYou decide how much you want to stake per cent, e.g. £3 per cent, £8 per cent, £10 per cent etc.
Simplified Trading ExerciseWith 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:

  Spread Betting Higher than 775.5¢? or
  Spread Betting Lower than 772.5¢?

You Might Choose to Go Long   Spread Betting 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:

  Spread Betting Higher than 775.5¢? or
  Spread Betting Lower than 772.5¢?

You Might Choose to Go Short   Spread Betting 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

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


Contact Customer Support

+44 (0) 203 301 0483
support@financialspreads.com

Also see: