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Referred to as “black gold” and “the mother of all commodities”, crude oil is used for manufacturing everything from plastics to petroleum, cosmetics to cars, and fabrics to pharmaceuticals.
With so much demand, it's little surprise that oil has been identified as a leading cause of modern wars.
Mostly, however, oil is traded peacefully.
In fact, in 2016, a whopping US$1,374 billion worth of refined and crude oil was traded on the global market, making it the most heavily traded commodity.
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The type of crude oil depends on the geographic location of the oil field and the characteristics of the oil itself. While there hundreds of types of crude oil traded on the global market, two primary types of crude oil serve as global benchmarks for oil prices: West Texas Intermediate and Brent Crude.
By country, the United States is both the world's biggest producer and consumer of oil. Each day it produces 17.87 million barrels of oil (18% of global production) and consumes 19.69 million barrels (20% of global consumption).
In terms of production, Saudi Arabia comes in second – producing 12.42 million barrels/day (12%) – followed by Russia with 11.40 million barrels (11%). Canada, China and Iraq each produce around 5% of global oil.
On the consumption side of the equation, China follows the US as the biggest user of oil – it consumes 12.79 million barrels/day (14%) while India's usage of 4.44 million barrels/day puts it third.
Saudi Aramco is the reigning global giant in terms of production. In 2018 it was the world's most profitable company, generating US$111.1 billion in net income and producing 13.6 million barrels/day.
Other top producers in 2018 were Sinopec (US$9.2 billion net income), China National Petroleum Corporation (US$7.4 billion), Royal Dutch Shell (US$23.9 billion) and ExxonMobil (US$20.8 billion).
Oil prices are highly volatile and heavily influenced by supply, demand and market sentiment. The Australian Institute of Petroleum lists more than a dozen fundamental drivers of international oil prices, including:
Learn how to trade commodities.
Oil is the most actively traded commodity on the planet and is subject to considerable price swings. This makes it a potentially market for those with a strong risk appetite, though it will not suit everybody. oil, natural gas, gasoline and low sulphur gasoil. To find out more visit CMC’s Commodities Platform. Meanwhile, other investors prefer to focus on share markets, which can be done via CMC’s Share trading page.
Is trading oil risky?
Oil is the most actively traded commodity on the planet and is subject to considerable price swings. This makes it a potentially market for those with a strong risk appetite, though it will not suit everybody.
Can you day trade oil?
Is crude oil a good investment?
The highly liquid and volatile nature of crude oil prices can make this commodity a good candidate for purchasing shares in oil companies or oil exchange traded funds (ETFs).
Trading oil futures?
The most direct method of trading is via oil futures – agreements to buy or sell oil at a specific date in the future at a particular price, or options – which allow traders the option of buying or selling at a stated price, within a specific timeframe.
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