Crude Oil Trading

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Crude oil is the fuel that drives global economy. One of the widest consumed commodity, crude oil trading is also among the most liquid in the world. Indian commodity exchanges too trade in crude oil. 

A Commodity Worth Noting

 In the commodity market, if there is one product that has shown dramatic changes in price, that product is crude oil. If you don’t believe it then the chart below will surely justify the first statement.

Source: Researchgate.net

With that graph, we can learn a few things about trading in crude oil futures

• Crude oil is one of the most liquid commodities in the world
• You can use both fundamental and technical analysis to understand crude oil futures trading
• Understanding the fluctuations in demand and supply for crude oil is crucial for making the most profits.

Crude oil is a commodity worth noting as is evident from the factors mentioned below.

 It is Complex – If there were ever a commodity that has rampant upswings and downswings on the stock markets, it is crude oil. As an international commodity that is actively traded by several thousand traders across the world, it is quite complex. 

 Examine the Factors that Influence the Crude Oil Market

 The crude oil market is influenced by the following factors. 

• The Organization of the Petroleum Exporting Countries (or OPEC) output and supply impact crude oil markets. 
• Shifting scenarios in oil demand within emerging and developing countries play a hand in crude oil movements. 
• American crude oil and product inventories impact this market.
• The refinery utilization rate is relevant here as well.
• Global geopolitics can influence the movement of crude oil prices.
• The crude oil market is influenced by speculative buying and selling.
• Weather conditions and natural disasters are relevant. 

Trading in crude oil futures on the MCX

Crude oil is traded in two contract types

1. Crude oil (main)
   1. Price quote: per barrel
   2. Lot size: 100 barrels
   3. Expire: 19th or 20th of every month
2. Crude oil (mini)
   1. Price quote: per barrel
   2. Lot size: 10 barrels
   3. Expiry: 19th or 20th every month

Crude oil mini is more widely traded among traders due to its low lot size and hence the margin required is also less.

 Wrapping Up

 In order to accrue consistent profits from trades conducted on crude oil as well as within the broader energy markets, you must possess exceptional skills. Should you seek to successfully trade crude oil futures along with its various derivatives, you must understand what governs the commodity’s movement, the nature of the crowd that dominates this market, the long-term price history and the physical variations that exist between varied grades.