Crude oil cfd
Family I · Instruments
Not to be confused with cfd, cfd trading, cfd analysis.
Crude oil CFD is a derivative instrument that gives exposure to the price movement of a crude oil benchmark without transferring ownership of the physical commodity. The contract is settled in cash for the difference between the opening and closing prices, and the underlying reference is typically a specific grade or futures contract. Because these contracts are traded over the counter with a broker, their size, margin requirements and available benchmarks vary by provider and jurisdiction.
Contract mechanics
A crude oil CFD is quoted as a price per barrel, and the position size is expressed in barrels or lots. Profit or loss is calculated as the difference between the entry and exit price multiplied by the number of barrels, minus any financing or commission charges. The contract does not expire in the way a futures contract does; instead, positions may be subject to a daily financing adjustment based on the notional value and the applicable interest rate. Brokers may also apply a rollover adjustment when the underlying futures contract approaches expiry, which varies by provider.
Worked example
Assume a trader buys 100 barrels of a crude oil CFD at $80.00 per barrel with a 5% margin requirement.
Distinguishing features
Crude oil CFDs are cash-settled and do not convey any right to physical barrels. The underlying reference may be a futures contract, a spot index or a broker-defined benchmark, and the specific reference determines the pricing and rollover behaviour. Financing costs, margin rates and trading hours are set by the broker and can differ significantly between providers and regulatory regimes.
Often confused with
- cfd
- A crude oil CFD is a specific instrument whose underlying is a crude oil benchmark, whereas a CFD is the general contract type that can reference equities, indices, currencies or commodities; the visible sign is the named underlying in the contract description.
- cfd trading
- Crude oil CFD denotes the instrument itself, while CFD trading refers to the activity of buying and selling such contracts; the visible sign is whether the term appears as a product name or as a description of an activity.
- cfd analysis
- Crude oil CFD is the tradable contract, whereas CFD analysis is the study of price behaviour, risk or strategy related to CFDs; the visible sign is whether the term is used as a noun for the instrument or as a label for research.