Oil is the most abundant energy source on Earth and it’s crucial to modern economies. But it’s also a commodity that is subject to volatile price movements due to supply and demand fundamentals, as well as political and economic developments. Trading oil futures is a popular way to speculate on oil prices without actually buying or selling physical barrels of the commodity itself.More info :theinvestorscentre.co.uk

Understanding Margins and Leverage in Oil Futures Trading

Essentially, an oil futures contract is an agreement to buy or sell a set number of barrels on a specific date in the future at a fixed price. The contracts vary in length – for example, the standard West Texas Intermediate (WTI) futures contract, traded with ticker symbol CL, represents 1000 barrels, while the E-Mini futures contract, traded with the ticker symbol QM, represents half that amount. Because most traders cannot physically deliver or take delivery of these large numbers of barrels, the contracts are non-deliverable and are settled financially at their expiry dates – either by a debit or credit in a trader’s account.

In recent years, there has been a rise in activity for trading oil futures on commodity exchanges like the New York Mercantile Exchange (NYMEX). This is partially driven by an increase in interest in oil as an investment opportunity, but also because more industrial users of the commodity are using futures to hedge their exposure to oil prices. The NYMEX publishes a weekly report called the Commitment of Traders that breaks down trading activity among the various categories of market participants, including commercial participants (those with a direct interest in physical oil production, storage or consumption), money managers and swap dealers.