Trading Brent Crude Oil (UKOUSD)

An introduction to Brent Oil

Brent Oil, or Brent Light Sweet Crude Oil, is fast becoming the global benchmark for the oil industry specifically, and the energy market in general. It’s a favourite amongst traders, because of the large price swings that occur, and the fact that it is so closely linked to the global economy.

Factors influencing price of Brent Oil

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The Brent crude price is influenced by numerous factors. Brent oil is extracted off the coast of Europe, which means its demand is closely linked to the economies of Europe and Africa, as well as the global economy.

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To understand what drives oil prices, you need to understand the issues affecting both supply and demand.

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Demand is driven by the level of economic activity around the world, or more specifically, expectations around future economic growth. That means consumer spending, industrial activity, interest rates and inflation are all important factors to consider.

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Supply is affected by the current and future capacity for exploration, extraction, processing and storage of oil. The capacity to transport oil in various parts of the world also affects the overall supply of oil, as well as the specific supply of Brent Oil. Geo-political events, crude oil reserves and changes in OPEC’s production targets also influence the oil price.

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Since most people trade Brent futures, or CFDs on Brent futures, the dynamics within the futures market can also impact prices.

Advantages and disadvantages of trading Brent

Advantages

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Brent Oil is rapidly becoming the benchmark for the energy industry.

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Oil prices are a proxy for global growth and other macroeconomic trends and themes.

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Traders can profit from rising and falling oil prices.

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Geo-political events often create opportunities for those trading Brent Oil.

Disadvantages

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The oil price can experience sudden price moves when unexpected events take place.

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To trade oil, you need to keep abreast of multiple trends and issues that can affect supply and demand.

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Reading Brent historical data

The Brent Crude Oil chart gives a good indication of how much prices can move, both up and down. In the lead up to the financial crisis in 2008, global growth and China’s growing economy led the Brent per barrel price to trade as high as $140.

After global markets crashed, concerns about the global economy saw the price fall to as low as $36.61. Price recovered as markets recovered between 2009 and 2011. At this point, new oil and gas production in the US caused prices to fall back to as low as $27 in early 2016.

With prices below $40, speculation of marginal produces halting production triggered a new bull market. Prices fell slightly again in early 2017 in anticipation of OPEC members increasing production. However, when a OPEC announced an extension of their production cuts, prices once again resumed their uptrend.

How can I trade Brent online?

Studying Brent crude historical data and the events that led to price moves is a great way to learn how to trade Brent oil. If you open a live or demo account with EightCap, you will be able to follow the price action and see how it reacts to the news surrounding the oil market.

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