Crude Oil Futures Definition
All major exchanges of world offer Crude Oil Futures in India MCX – Multi Commodity Exchange and NCEDX are popular exchanges for crude oil futures trading. On MCX, Crude oil can be traded in 2 variants viz. Crude oil, Crude oil mini. Let’s discuss crude oil futures in this article.
Unlike other commodities like gold futures and silver futures which derive prices from multiple factors, in case of crude, price isn’t determined only by demand and supply forces but also by speculators influencing price determination. Commodity markets exhibit cyclical movement in price curve and crude shows a co relation to the same.
Trading in crude oil futures is similar to trading in equity futures. Crude oil futures are nothing but exchange traded standardized contracts between a buyer and a seller in which buyer is bound by an obligatory contract to take delivery of specific quantity of crude oil (lot) at certain pre-decided price on future date.
Usage of Crude oil Futures
Since, Crude oil explorers and many crude oil consumers viz. refiners, oil marketing companies, energy companies, etc use crude oil futures to hedge their price. Crude oil producers can lock in their selling price buy shorting crude oil future against inventory.
Similarly, crude oil consumers can fix their purchasing price by going long on crude oil futures.
Crude oil futures is one of the popular trading product among speculators. By estimating rise or fall in the prices, speculators also buy or short crude oil futures regularly and prefer cash settlement (settling the difference between buying price of future and price at the time of expiry). For trading Crude oil, if one focuses on price action and does a proper technical analysis, serious money can be made because this is one of the only markets in the world which cannot be manipulated.
Factors driving Crude Oil Commodity Prices and therefore Crude Oil Futures Contracts
- Outcome of OPEC meetings with decisions on output of crude oil, supply, and inventory
- Crude Oil Inventory data from the USA
- Demand from Emerging markets and geopolitical situation in the World
Quick Facts on Crude Oil Commodity Trading and MCX Crude Oil Contract Specifications –
Crude Oil Trading Symbol – CRUDEOILDDMMMYYYY
Instrument Type – COMMODITY FUTURES
Lot Size (Units) – 100 Barrels and the Max single order size is 10000 Barrels
ELM Margin – 1%
Lot Size (Value) – Price of 100 Barrels crude oil.
Tick Size – Re. 1 per barrel
Underlying – Crude oil
Trading Time – Crude Oil can be traded during the normal MCX market timings.
Trading Crude Oil Futures Live on the SAMCO Trading Platforms
For trading in Crude Oil futures, clients must open a commodity trading account and must activate the exchange segment – MCX. Subsequently, the Crude Oil futures contracts can be added and traded on the live trading terminal. Traders must select the Exchange MCX, Instrument Crude Oil and Contract Expiry as desired.
Traders have access to the live Crude Oil futures prices which are streamed live from the exchanges and can also access intraday Crude Oil futures charts and historical Crude Oil futures charts.
Brokerage for trading Crude Oil Futures
With SAMCO, India’s leading discount broker, Crude Oil futures and Crude Oil mini can all be traded at Flat Rs. 20 per executed order or 0.02% of turnover whichever, is lower. Calculate your savings for trading Crude Oil futures on the commodity brokerage calculator.
Other Charges applicable while trading Crude Oil Futures
Additional Reference Articles