Wednesday 25 November 2020 1:00 pm FXCM Talk

Going green – Does it threaten the future of oil speculation?

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Craig has worked in the foreign currency and CFD trading industry for the last 10 years, and is currently the CFD Product Manager of FXCM, where he primarily oversees the suitability and expansion of the tradeable product line.

Going green has rapidly risen on the agendas of the world’s leading companies, and by extension, investors big and small. You don’t have to look far in the news to see the growing popularity, if not expectation, of Environmental, Social and Governance (ESG) values being adopted in boardrooms.

Combine those changing attitudes with the chaos that the COVID-19 pandemic caused for the oil markets – essentially drying up demand worldwide – and you could be excused for having your doubts about this asset. 

But let’s not get ahead of ourselves. 

For the eagle-eyed active trader, plenty of profitable opportunities to speculate and trade in oil remain precisely because of this enduring volatility. At the height of the COVID-19 crisis, oil speculation among retail investors went into overdrive. Volumes soared on a number of derivate products more suited than traditional futures trading to meet this eager new demand, such as Spot Oil CFDs. 

Today we see energy derivatives in every shape and size, to meet every budget and risk appetite. This is far from a dying market waiting for a final nail in its coffin. It’s very much alive and thriving for those willing to go both long and short when the opportunity presents.

ESG – How will it impact in the near future? 

Oil companies have been faced with greater scrutiny and pressure not only from environmental regulations to reduce their emissions, but also from within, as industry leaders like BP commit to 0 emissions within the next 30 years.

In turn, ESG investing has recently soared in popularity with recent research valued ESG-driven assets to be worth $40 trillion– a figure that has doubled over the last four years alone. 

Some have argued that the shocks in oil prices this year will turn investors to ESG alternatives. Others have argued lower prices and higher volatility will actually move to entice new investors looking for an opportunity into oil trading instruments. 

However, in round one of the lockdown speculation in oil by retail investors surged to record highs and ESG pressure took a backseat behind other pandemic hot topics. In turn, the door of opportunity for those willing to speculate in both directions via a CFD or other derivative products remained wide open. 

The enduring popularity of oil trading 

We’re now at round two of lockdown and the second lockdown will likely not be the same as the first. 

While oil demand will continue to fluctuate throughout this pandemic, the fact that the restrictions are not as severe as what we saw in the spring, means demand will inevitably remain. Businesses are less willing to close, the school rush will return and people will still commute to work. 

Oil has a knack for rebounding and rallying, making the eventual yield an attractive prospect for many. For investors looking to get the most out of the volatility and price movement, Oil Spot CFDs could be a very effective solution. 

By trading in CFD form, contract sizes are a lot smaller than the industry-standard futures options and far more accessible for the average retail trader and without a set expiry date, Oil Spot CFDs enable investors to hold a position open as long as they wish without the concern of increasing illiquidity of a contract approaching expiry. 

With instruments such as these, it’s never been easier to speculate on oil according to one’s own personal preferences, budgets and appetites. This is the precise role of an established broker – to provide its clients with the instruments and the resources needed to trade the most popular and lucrative assets today, whatever the conditions may be. 

Past performance is not indicative of future results.

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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 

74.74%of retail investor accounts lose money when trading CFDs with this provider.

You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

FXCM is a leading provider of online foreign exchange (FX) trading, CFD trading, and related services. Founded in 1999, the company’s mission is to provide global traders with access to the world’s largest and most liquid market by offering innovative trading tools, hiring excellent trading educators, meeting strict financial standards and striving for the best online trading experience in the market. Clients have the advantage of mobile trading, one-click order execution and trading from real-time charts. In addition, FXCM offers educational courses on FX trading and provides trading tools, proprietary data and premium resources. FXCM Pro provides retail brokers, small hedge funds and emerging market banks access to wholesale execution and liquidity, while providing high and medium frequency funds access to prime brokerage services via FXCM Prime. FXCM is a Leucadia Company.

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