How Much Is a Crude Oil Contract

Major current events can happen overnight, causing oil prices to fluctuate unpredictably and across the board. The same can happen throughout the day, as crude oil futures trade day and night. Whether it`s an economic report or tensions in the Middle East, a tense supply situation can exacerbate price movements. Supply and demand dictate the evolution of prices, but the market also evolves due to emotions, especially among retail investors who trade during the day. As tensions escalate in the Middle East, it`s unclear how great the scale of potential supply disruptions could be, and traders often react quickly to news and adjust their strategies to price fluctuations. When tracking price movements and doing business, remember that lead-free gas and furnace oil prices can affect the price of crude oil. Demand is usually highest during the summer and winter months, but for different reasons. In summer, driving increases demand for crude oil and causes prices to rise. In winter, higher demand for heating oil leads to higher prices. Watch for the weather in the northeast, as this is the part of the country that uses heating oil more than anyone else, and monitor reductions or increases in oil production from the Organization of the Petroleum Exporting Countries (OPEC), which determines global crude oil supply and demand. It is important to understand the benefits and risks of crude oil futures before placing a futures transaction. Compared to traditional investments, you can trade crude oil futures almost 24 hours a day during the trading week and take advantage of trading opportunities, regardless of the direction of the market.

Crude oil futures also offer the opportunity to trade with greater leverage and allow for a more efficient use of trading capital. However, trading leveraged products such as crude oil futures also carries the risk that losses will exceed the amount initially invested and not be suitable for all investors. A tick is the smallest absolute movement a contract can undergo. In real-world scenarios, a contract can move hundreds of ticks in a day. In just a few hours, a trader can suffer massive gains or losses. Are you planning to trade crude oil futures? Here are the specifications for crude oil futures. For the standard crude oil contract, the value of the checkmark is $10. Indeed, each contract represents 1,000 barrels of oil and the check mark for each barrel is measured in increments of $0.01.

If you have a position in a contract, a tick movement will result in a profit or loss of $10. If the price moves around 10 ticks, you win or lose $100. If it moves 10 ticks and you trade three contracts, your profit or loss is $300. The amount of capital you need in your account to trade a crude oil futures contract on a daily basis depends on your futures broker, but you can expect a minimum of around $1,000. Keep in mind that you also need enough money in the account to make up for losses. If you decide you don`t want to risk more than 1% of your principal for a single trade, a person with $1,000 in their account can only risk $10 per trade. Crude oil trading can be confusing when you start. Try to remember these specifications before you start trading: The most important reports for crude oil can be found in the U.S. Energy Information Administration`s (EIA) weekly energy stock report.

This report is released every Wednesday around 1 p..m .m. Eastern Time. In most cases, crude oil tends to be a trend market primarily driven by psychological movements, and there is usually a big upward or downward trend. However, trading on the trend side will definitely help improve your chances of success. Crude oil also tends to get stuck in longer areas after a significant movement, and a person who can identify these areas has many opportunities to buy at the bottom and sell at the top end. However, while you can trade individual stocks per day, ETFs (like stocks) are usually traded in blocks of 100 shares called lots. If the price hovers around a penny and you hold 100 shares, you will win or lose $1. Option contracts typically cover at least 100 shares of the underlying security, so options traders cannot trade individual stocks.

Crude oil futures on the New York Mercantile Exchange (NYMEX) are the world`s most actively traded futures contract on a physical commodity. Due to its excellent liquidity and price transparency, the contract is used as the most important international price reference. NYMEX also offers trading of heating oil futures and gasoline futures. The value of a futures contract is derived from the current value of the underlying asset. While a futures contract can have a very high value, a trader can buy or sell the contract with a much lower amount known as the initial margin. The initial margin is essentially a down payment on the value of the futures contract and the obligations associated with the contract. Futures trading is different from stock trading due to the high leverage. This leverage can amplify gains and losses. In the oil example, let`s assume that the maintenance margin is $4,000. If a trader buys an oil contract and the price drops by $2, the value of the contract has dropped by $2,000. If the account balance is less than the maintenance margin, the trader must use additional funds to reach the maintenance margin.

If the trader does not respond to the margin call, the broker or exchange could unilaterally liquidate the position. Crude oil is crude oil extracted directly from the ground. Crude oil was formed millions of years ago from the remains of tiny aquatic plants and animals that lived in ancient seas. Ancient societies such as the Persians, 10th century Sumatrans, and pre-Columbian Indians believed that crude oil had medicinal benefits. Around 4,000 BC. J.-C. Bitumen, a crude oil of tar, was used in Mesopotamia as a waterproofing agent for ships, as a backdrop for jewelry and mosaics, and as an adhesive to secure weapon handles. The walls of Babylon and the famous pyramids were held together with bitumen, and the Egyptians used it for embalming.

During the 19th century, an oil discovery in America was often received with dismay. Pioneers who dug wells for water or brine were disappointed when they came across oil. It was not until 1854, with the invention of the kerosene lamp, that the first great demand for crude oil arose. Crude oil is a relatively abundant raw material. The world has produced about 650 billion barrels of oil, but another trillion barrels of proven reserves has yet to be extracted. Crude oil was the world`s largest trillion-dollar industry and is the largest product of world trade. Futures and options on crude oil trading on the CME Group and on the ICE Futures Europe Stock Exchange in London. The CME trades two main types of crude oil: light sweet crude and Brent crude. The light futures contract calls for the delivery of 1,000 barrels of crude oil to Cushing, Oklahoma. Light sweet crude oil is preferred by refineries because of its low sulfur content and relatively high yield of high-quality products such as gasoline, diesel fuel, heating distillate oil and kerosene. Brent Blend crude oil is based on light, sweet crude oil from the North Sea. Brent crude oil production is about 500,000 barrels per day and is shipped from Sullom Voe to the Shetland Islands.

Prices – CmE West Texas Intermediate (WTI) Crude oil prices (symbol Barchart.com CL) followed an upward trend in Q2-2019, recording an annual high of $66.60 per barrel in April. Concerns about tightening global supply have led to higher crude oil prices after the United States tightened sanctions on Iran and sharply reduced its ability to export crude. U.S. sanctions against Venezuela and the conflict in Libya are also putting even greater pressure on global oil supplies. Crude oil prices then fell to a 2019 low of $50.60 a barrel in June, fearing that the ongoing U.S.-China trade war could hurt global economic growth and energy demand. The International Energy Agency (IEA) said global crude oil consumption grew by only 520,000 bpd from January to May 2019, half the previous year`s rate and the slowest for the period since 2008. Crude oil prices then soared to more than $60 a barrel in September 2019 due to heightened geopolitical tensions after Houthi rebels launched drone strikes on the world`s largest oil processing facility in Saudi Arabia, temporarily eliminating more than 5 million barrels of Saudi oil production. In the wake of the attack, OPEC crude oil production fell to its lowest level in 9 years of 28.59 million barrels per day in September.

However, Saudi crude oil production quickly recovered and prices fell back to $50 a barrel. The dollar index also rebounded to a 21/2-year high in October 2019, which was negative for crude oil prices. Oil prices were also undercut by the surge in shale oil drilling, while U.S. crude oil production hit a record high of 12.9 million barrels per day in November. However, crude oil prices recovered above $60 a barrel after the U.S. and China agreed on a phase one trade deal in December 2019 and military tensions between the U.S. and Iran remained high. .