Commodity CFDs
Commodity CFDs let you speculate on changes in gold, oil, natural gas, agricultural products and other raw materials without owning them. Your contract is with the provider, and the price movement determines your trading profit or loss before costs. As ASIC’s Moneysmart guide explains, CFDs are high risk products, and most people lose money trading them.
The practical question is not just whether a commodity will rise or fall. You also need to know which benchmark the contract follows, how much exposure each unit creates, and what happens overnight or at expiry. These details distinguish commodities from other CFD markets.
For U.S. readers: retail commodity CFDs are generally unavailable through U.S. regulated brokers, as reflected in OANDA’s U.S. product disclosures. An offshore account is not a regulatory workaround. The CFTC’s enforcement action against PaxForex documents unlawful off-exchange retail transactions involving gold and silver.
How Commodity CFDs Work
A long position benefits when the CFD price rises; a short position benefits when it falls. The opposite movement creates a loss. You deposit margin rather than paying the position’s full notional value, but gains and losses depend on the full exposure. The deposit is not a maximum loss figure. These mechanics are covered in Moneysmart’s explanation of CFD positions and margin.
For a contract expressed in physical units, the basic calculation for a long position is:
Trading profit or loss = (closing price − opening price) × equivalent quantity
Reverse the price difference for a short position. If the broker instead quotes a cash value per point, multiply the number of points gained or lost by that value and your trade size. Our guide to how CFD trading works covers the general calculation. With commodities, checking the unit comes before doing the arithmetic.
Commodity Markets and Their Price Drivers
“Commodities” is a category, not a single trading idea. A weather forecast matters differently to natural gas, wheat and gold. Start with the forces affecting the underlying market.
| Market | Examples | Price drivers |
|---|---|---|
| Precious metals | Gold and silver | Investment demand, interest rates, inflation and industrial use |
| Industrial metals | Copper | Manufacturing and construction demand, economic growth and available supply |
| Crude oil | WTI and Brent | Producer output, inventories and consumption |
| Natural gas | Contracts referencing U.S. natural gas | Weather, production, storage and export demand |
| Agricultural products | Wheat, corn and soybeans | Planting conditions, crop yields, weather and consumption |
Metals deserve a distinction within that table. CME Group’s metals analysis separates investment demand from industrial demand. Copper’s exposure to construction is not interchangeable with gold’s investment demand. Treating every metal as the same inflation trade misses much of the explanation.
Next, identify the actual instrument. Write down the benchmark, reference currency and contract month, where applicable. A label such as “oil” is not enough for a trade plan. Broker product documents distinguish between underlying markets, dated contracts and spot pricing; IG’s commodity contract details show why these distinctions matter.
Spot and Futures Based Commodity CFDs
Cash or undated contracts
An undated CFD has no scheduled expiry, but “spot” does not always mean a direct quote from the physical market. Pricing methods differ by commodity. IG, for example, says its spot metals prices use quotes from banks and liquidity providers, while its metals futures CFDs reference the corresponding futures expiry. Check the pricing method rather than relying on the product name.
For its undated commodity pricing model, IG describes a price constructed from two nearby futures contracts. Its overnight adjustment separates the movement along the futures curve from the provider’s administration charge. That is different from treating every overnight debit as interest.
Dated commodity CFDs
A dated CFD references a futures contract and has an expiry or last dealing date. It remains a CFD with the provider, not an exchange futures position in your own account. The provider’s settlement and rollover terms govern what happens when that date arrives.
At IG, dated commodity CFDs have no separate overnight funding charge but generally wider spreads than undated contracts. That is a provider example, not a universal fee rule. Compare both formats over your intended holding period, and establish whether an open position will close, settle or roll into another contract.
Why the futures curve matters
Futures prices differ across delivery months. An upward sloping curve is commonly described as contango; a downward sloping curve as backwardation. CME Group explains how storage, financing and the benefit of holding physical inventory affect these relationships. The curve is not a promise about where prices will go.
Suppose an expiring oil reference is $75 and the next contract is $77. Moving to the $77 reference does not create a free $2 trading profit. You have changed contracts. Depending on the product, the broker may close and reopen the position, apply an offsetting adjustment, or transition its reference price gradually.
In the undated pricing model described above, the basis adjustment offsets the mechanical movement between futures references. It is separate from the provider’s fee. The practical lesson: assess price changes and account adjustments together. A continuous chart alone does not explain the return from holding the position.
A Commodity CFD Trade Example
Consider a hypothetical long oil CFD. These figures are illustrative, not current market quotes. Assume the broker permits exposure equivalent to 100 barrels, the execution price is $75 per barrel, and the required margin is 10%.
The notional exposure is $7,500, so opening margin is $750. Each $1 per barrel movement changes the position’s value by $100.
If you later sell at an executable bid price of $76.20, the trading profit is:
($76.20 − $75.00) × 100 = $120
If you instead sell at $73.80, the trading loss is $120. A 1.6% adverse movement has produced a loss equal to 16% of the initial margin, before other charges. That percentage is measured against margin, not necessarily against your entire account.
Because the example uses actual opening and closing execution prices, their spread effect is already reflected. Do not deduct that same spread again. Separate financing, commissions or conversion charges would still need to be included.
Now suppose your planned exit is $1 below entry. At 100 barrels, the planned price risk is $100 before slippage and costs. If that exceeds your budget, reduce the quantity rather than choosing an arbitrary tighter exit. This is where CFD position sizing belongs in the decision.
What Commodity CFD Trading Costs
Compare the total cost of the intended trade, not just the advertised spread. In its review of CFD pricing and value, the FCA found wide differences in overnight charges and weaknesses in how firms explained them. A low entry cost can be outweighed by the expense of holding a position.
Check the bid and ask spread, any commission, the overnight calculation, rollover treatment and currency conversion terms. Where funding is calculated as a percentage of exposure, do not assume the rate applies only to your margin deposit. The FCA’s review highlighted charges applied to the full exposure without an offset for cash held in the account.
Ask for an estimate covering your expected holding period and a longer one. A trade planned for two days should also be costed for two weeks if your rules permit it to stay open that long. “I will wait for it to recover” is not a financing plan.
For undated energy contracts, separate the futures basis adjustment from the administration fee before comparing providers. For dated contracts, include the cost of any roll your plan would require. Our guides to CFD trading costs and overnight financing explain the broader fee mechanics.
Margin Limits and Commodity Trading Risks
Margin protection is not trade protection
For UK retail clients, FCA rules require at least 5% initial margin for gold and 10% for other commodities, equivalent to maximum exposure ratios of 20:1 and 10:1. Providers may require more. These are UK retail rules, not worldwide account settings.
The rules also require position closure when account equity falls below the prescribed 50% margin threshold, as soon as market conditions allow, and provide account level negative balance protection. Neither protection prevents the loss of the funds in that CFD account. A margin closeout is not a substitute for a planned exit; see CFD margin requirements for the wider mechanics.
Scheduled releases and unexpected events
Build an event calendar around the commodity. The EIA’s Weekly Petroleum Status Report provides oil inventory and supply data. For grains and oilseeds, the USDA’s monthly WASDE report provides supply and use forecasts. Check the publishing agency’s calendar rather than assuming every release follows its usual schedule.
Before a scheduled report, decide whether your trade plan permits holding through it. Record what result would weaken your original reasoning, not just the outcome you hope to see. This makes the decision easier to review after the event.
Stops, gaps and provider risk
A standard stop can execute beyond its requested level when prices move sharply. A guaranteed stop, where available, protects the chosen exit level under the provider’s terms and usually carries a premium. IG’s explanation of standard and guaranteed stops illustrates the difference. Check eligibility and charges before treating either order as protection; our CFD stop loss guide covers the distinction.
There is also provider risk. You rely on the issuer to meet its obligations, and regulation does not eliminate insolvency risk, as Moneysmart explains. Separately, the FCA warns that moving offshore or accepting professional classification can remove retail protections. Check the legal entity holding your account, not just the brand on the website.
Before Placing a Commodity CFD Order
Use the contract terms to complete a short written trade plan. If a detail is unclear, resolve it before placing the order.
- Reference market: identify the commodity benchmark and any futures month used for pricing.
- Trade size: calculate the equivalent quantity, value per point and full notional exposure.
- Holding period: record funding cutoffs, expiry dates and possible rollover costs.
- Exit conditions: state the price or change in your reasoning that would end the trade.
- Account risk: check available margin, other open positions and the loss you could absorb.
A useful final test is to explain the position without referring to the chart: what price it follows, what a one unit movement costs, and what keeping it open will cost. If those answers are missing, the trade is not ready. Commodity selection matters, but contract selection and position size deserve the same attention.