UKOIL represents the Contract for Difference (CFD) derived from Spot Brent Crude Oil, enabling traders to speculate on the movement of the spot Brent price. In this article, we will interpret it from a finance trading perspective, exploring the contract details of Brent CFD. Key takeaways:
- As a Brent oil CFD derivative, UKOIL mirrors the pricing from the spot Brent market.
- Spot Brent CFD supports a minimum trade size of 0.01 lots (equivalent to 1 barre).
- Anyone can trade Brent oil CFD with a small margin requirement of less than $1.
UKOIL & Spot Brent Market
The spot Brent crude oil market, dominated by companies involved in crude oil extraction, refining, and wholesaling, establishes the price of Brent oil for immediate delivery. It operates as a purely institutional market inaccessible to retail traders.
UKOIL is a CFD on Brent crude oil, enabling traders to speculate on the price of spot Brent without directly participating in the underlying Spot Brent market.
Individule traders to engage in UKOIL trading not for the purpose of physical crude oil delivery or long-term investment, but rather to speculate on the price movement.
Trade UKOIL on MT5 platform
Many Forex traders may encounter UKOIL on popular platforms like MT5 and its sister platform MT4. This is because leveraged Forex trading also falls under the CFD trading family, in fact, Forex is the most popular form of CFD trading.
Therefore, numerous Forex brokers offer Brent CFD, alongside Forex pair offerings on the same MT4/5 platform.
While UKOIL is commonly used as the symbol for spot Brent CFD, not all Forex brokers use it as the symbol. Some may opt for alternative symbols such as Brent, Brent Cash, or Spot Brent. If you cannot locate UKOIL in the market watch window of MT5, simply search for ‘brent’ in the ‘click to add…’ column.
Brent CFD VS Brent Futures
1). UKOIL VS Brent Futures
Before the invention of CFD on Brent crude oil, Brent Futures was the primary financial instrument used to speculate on Brent price. Here are the key differences between Brent spot CFD and Brent futures:
Spot Brent CFD reflects the immediate delivery price of Brent, whereas the futures represents the Brent price for delivery in the future.
UKOIL doesn’t have an expiry date, allowing traders to trade continuously. On the other hand, Brent futures contracts are expired on monthly basis.
While Brent futures is traded on margin and offers mini contract, it requires a minimum margin of nearly $1,000. In contrast, Brent CFD offers better flexibility with a smaller minimum margin starting from $1.
2). Spot Brent CFD VS Futures CFD
In fact, there are also CFDs derived from Brent futures, sharing the same contract month and expiry date as the futures market. However, these CFDs offer more flexible contract sizes and leverage options compared to futures contracts.
The trading cost of Brent futures CFD is typically higher than that of Brent spot CFD. Some brokers offer both spot Brent and futures CFDs at the same time, and below is an example. The first symbol represents Brent spot CFD, while the second is the futures CFD. The spread on the spot is 30% lower than that of the futures.
Given the trading cost differences and the absence of expiry dates, most individual investors, especially short-term traders, opt for spot Brent CFD over futures CFD. Unless otherwise specified, Brent oil CFD typically represent spot CFD.
Brent CFD Contract Specifics
1). UKOIL Contract Size
Brent oil CFD is typically contracted in units of 100 barrels, which is the same size as mini Brent futures. Presently, with Brent trading at $87 per barrel, the contract size of 1 lot of Brent CFD is $8,700.
However, it’s important to note that as a CFD derivative, there is no standardized contract size for Brent CFD. Some brokers may use a different size, such as 1,000 barrels.
UKOIL Typical Contract Size = 100 Barrels
2). Minimum Trading Lot
The minimum trading lot size is one of the most important factors contributing to the accessibility of UKOIL trading. It supports trading at 0.01 lots, equivalent to just 1 barrel. Even without leverage, many individuals can afford the full contract value of 1 barrel of Brent.
UKOIL Minimum Lot = 0.01 lots (1 Barrel)
3). UKOIL Trading Leverage
While many individuals can afford the full contract value of 0.01 lots of Brent oil CFD, the potential profit and loss (P&L) from such micro trading are relatively small. For instance, even with a significant $10 movement in Brent price, the P&L of 0.01 lots amounts to just $10.
Typically, experienced traders opt for larger positions, such as 0.1 lots (equivalent to 10 barrels), in order to achieve more substantial gains or losses.
As the trade size increases to 0.1 lots, the full contract value (nearly $1,000) becomes a significant amount for individuals. This is where leverage can be advantageous. Assuming a leverage ratio of 1:100, trading 0.1 lots of UKOIL only requires a small margin of less than $10. Leverage ratios may vary among brokers.
Margin Rate of Brent CFD
The trading threshold of Brent oil CFD is determined by the margin requirement, influenced by two key factors:
- Contract value: determined by the trading lot size and the opening price.
- Trading leverage: determined by the policies of CFD brokers.
The margin rate formula for Brent CFD, based on a contract size of 100 barrels, is calculated as follows:
(Trading lot × Opening price × 100) ÷ Leverage
Given that leverage may vary among brokers, the table below compares the margin requirements for trading 1 lot, 0.1 lots, and 0.01 lots with leverage ratios of 1:100, 1:200, and 1:500 respectively, at the price of $87 per barrel.
| UKOIL Margin Requirement | |||
|---|---|---|---|
| 1 lot (100 barrels) | 0.1 lot (10 barrels) | 0.01 lot (1 barrel) | |
| 1:100 Leverage Ratio | $87 | $8.7 | $0.87 |
| 1:200 Leverage Ratio | $43.5 | $4.35 | $0.44 |
| 1:500 Leverage Ratio | $17.5 | $1.75 | $0.18 |
The margin requirement is less than $100, even for a trade size of 100 barrels, making it affordable for many traders. While new traders can begin with 0.01 lots, allowing them to trade with minimal P&L risk.
Costs of UKOIL Trading
The trading spread, representing the difference between the ask and bid prices, stands as the primary cost associated with UKOIL Trading. The spread shown in below is 0.03, equivalent to 3 pips.
How to understand the spread of 0.03? It means that $0.03 spread fees will be charged for every 1 barrel traded. If the trade size is 1 lo t(100 barrels), then the spread fees of 3 pips is equivalent to 3 USD。
Most brokers adopt a floating spread on Brent CFD, which means that the spread can fluctuate at any time based on market conditions. The mentioned spread of 0.03 here is for demonstration purposes only, actual spreads may vary depending on brokers and trading hours.
UKOIL Trading Hours
The trading hours for Brent CFDs may differ among brokers, the hours provided below are for reference purposes.
UKOIL Trading Hours (US Daylight Saving Time)
During US daylight saving time, UKOIL typically opens at 8:00 AM and closes at 06:00 AM the next day, Monday to Friday, GMT+8. There is a two-hour daily break from 06:00 AM to 08:00 AM.
UKOIL Trading Hours (US Winter Time)
The trading hours for Brent CFD is adjusted by one hour in US winter time, opening at 09:00 AM and closing at 07:00 AM the next day.
It’s important to note that there may be differences in market open and close times among different brokers, ranging from 5 minutes to 1 hour. Be sure to check with your broker for the exact trading hours.
Brokers for USOIL Trading
1). ThinkMarkets
| Trading symbol | BRENT | Max leverage | 1:500 |
| Contract size | 100 barrels | Regular spread | 0.03 |
| Platform | MT4/MT5/ThinkTrader | Min trading lot | 0.1 lots |
| Regulation | UK FCA, AU ASIC, Japan FSA, NZ FMA, Cyprus SEC, South Africa FSCA | ||
2). INFINOX
| Trading symbol | UKOUSD | Max leverage | 1:1000 |
| Contract size | 100 barrels | Regular spread | 0.05 |
| Platform | MT4/MT5 | Min trading lot | 0.01 lots |
| Regulation | UK FCA, South Africa FSCA, Bahamas SCB, Mauritius FSC | ||
3). Pepperstone
| Trading symbol | SpotBrent | Max leverage | 1:100 |
| Contract size | 100 barrels | Regular spread | 0.03 |
| Platform | MT4/MT5 | Min trading lot | 0.01 lots |
| Regulation | UK FCA, AU ASIC, Cyprus SEC, Dubai FSA | ||
4). Exness
| Trading symbol | UKOIL | Max leverage | 1:200 |
| Contract size | 1000 barrels | Regular spread | 0.07 |
| Platform | MT4/MT5 | Min trading lot | 0.01 lots |
| Regulation | UK FCA, Cyprus SEC, South Africa FSCA | ||
5). Oanda
| Trading symbol | UKOIL | Max leverage | 1:100 |
| Contract size | 1000 barrels | Regular spread | 0.03 |
| Platform | MT4/MT5/FXTRADE | Min trading lot | 0.01 lots |
| Regulation | US NFA, UK FCA, AU ASIC, Japan FSA, Singapore MAS | ||
