November 2, 2024

Oil Futures Trading

Oil is one of the most in-demand commodities, but it can also be volatile. With oil futures trading available around-the-clock, investors can take positions based on economic and political news that can sway prices.URL :theinvestorscentre.co.uk

Crude oil is the raw material that is refined into gasoline, heating oil, diesel fuel, jet fuel and other petrochemicals. It is sourced from carbon in ancient organic matter that has been buried under heat and pressure for millions of years. The demand for petroleum products continues to rise, but the supply is limited. This is what drives prices higher over time.

How to Start Trading Oil Futures: Step-by-Step Guide

When trading oil futures, a trader agrees to buy or sell crude at a specific price on a future date. Each contract controls a certain number of barrels, which varies depending on the type of crude traded. The most popular is WTI crude, which is traded on the New York Mercantile Exchange. The other major grade is Brent crude, which is traded on the Intercontinental Exchange. Both are considered benchmarks for global oil prices and the economic health of the world’s biggest energy producers.

Traders often use futures contracts to hedge or arbitrage real-world events, such as refinery maintenance. They may also use them to speculate on the long-term direction of oil prices. Since physical investment in the commodity requires operational know-how and expensive infrastructure, investors can gain exposure to crude through futures.

The market for oil futures has increased in recent years, as seen by rising open interest. This suggests that traders have a growing interest in hedging and speculation against a backdrop of uncertainty over the availability of crude oil.