The crude oil futures market is highly liquid and allows futures traders to directly speculate on the price fluctuations of crude oil. As one of the world’s most active commodities, crude oil futures provide an opportunity to trade an uncorrelated market when compared to highly correlated investments like stocks.
Crude oil is predominantly used as a major source of energy and can also be refined into a wide variety of products including gasoline, diesel fuel, jet fuel, heating oil, and petroleum gas. As crude oil impacts daily life for individuals, corporations, and countries across the globe, challenges related to oil exploration and production along with geopolitical influences make crude oil futures a particularly dynamic and active market to trade.
Crude oil futures (contract symbol = CL) are a well-established market that provides futures traders with direct exposure to speculate on the price movement of this limited resource. Benefits of trading crude oil futures include:
Cost-effective trading for one of the world’s most active commodities
High liquidity compared to many other asset classes
Nearly 24-hour trading to capitalize on unique opportunities
Flexible contract sizes—start small with micro contracts, then scale up
At 1/10th the size of the standard contract, Micro crude oil futures (MCL) allow traders like you to access the highly liquid crude oil marketplace with a reduced financial commitment. Other advantages of trading micro crude oil futures include:
Leverage also increases the risk associated with futures trading and only risk capital should be used for trading
Crude oil futures traders can be broken down into three main groups:
There is strong correlation between the US dollar and the crude oil market. The US dollar plays a significant role in crude oil pricing as most international crude oil transactions are conducted in US dollars, with major benchmark products such as Brent (North Sea) and WTI (West Texas Intermediate) quoted in US dollars per barrel. This means that fluctuations in the value of the US dollar can often directly impact the price of crude oil.
Geopolitical and geoeconomic factors like international conflicts and political instability can lead to supply disruption, which can drive the price of crude oil higher. The energy policies of individual countries and other groups like the Organization of the Petroleum Exporting Countries (OPEC) can also have significant effects on the price of crude oil. When it comes to trading crude oil futures, it’s important to keep abreast of current economic news and events and have a good understanding of the key fundamental pricing factors in the crude oil market.
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The primary risk of trading crude oil futures is that the price will go against the trader’s position. When trading crude oil futures, it can be easy for traders to get caught up in the excitement of the price action.
Using appropriate trade sizing for your account size and having a robust trading risk management plan in place that includes stop losses or a trailing stop can go a long way, helping to reduce and control your risk exposure.
Tips to keep in mind, especially for newer futures traders, include:
Crude oil futures are standardized exchange-traded contracts that represent 1,000 barrels of crude oil (standard contract) or 100 barrels of crude oil (Micro contract). You can trade crude oil futures through the New York Mercantile Exchange (NYMEX) on the electronic CME Globex system. Retail traders typically buy and sell crude oil futures contracts to speculate whether the price will go up or down and cannot take delivery of the physical crude oil. NinjaTrader’s policy is to auto-liquidate any open physically delivered contract position going into the first notice date.
| Standard Contract | Micro Contract | |
|---|---|---|
| Symbol | CL | MCL |
Exchange | NYMEX/CME | NYMEX / CME |
| Contract point value | 1,000 barrels | 100 barrels |
| Minimum price fluctuation | .01, (1,000 * .01 = $10.00 per-contract per-minimum move) | 01, (100 * .01 = $1.00 per-contract per-minimum move) |
| Trading hours | Sunday 6:00PM ET to Friday 5:00PM ET | Sunday 6:00pm ET to Friday 5:00pm ET |
| Listed contracts | Monthly contracts listed for the current year and the next 10 calendar years and two additional contract months. Jan.(F), Feb.(G), Mar.(H), April(J), May(K), June(M), July(N), Aug.(Q), Sept(U), Oct.(V), Nov.(X), Dec.(Z) | Monthly contracts listed for the current year and the next 12 calendar years. Jan.(F), Feb.(G), Mar.(H), April(J), May(K), June(M), July(N), Aug.(Q), Sept(U), Oct.(V), Nov.(X), Dec(Z) |
| First notice date^ | Two trading days after last trading day of the expiring contract | N/A |
| Expiration style | Trading ceases three business days before the 25th calendar day of the month prior to the contract month | Trading ceases one business day before the corresponding CL contract month or four business days before the 25th calendar of the month prior to the contract month |
| Settlement | Deliverable | Financially settled |
| Additional Specifications | View all from CME Group | View all from CME Group |
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The Organization of the Petroleum Exporting Countries (OPEC) was founded in 1960 by Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela to better coordinate crude oil policies and production levels among the member countries to help stabilize oil prices. Over the years, OPEC has expanded to include seven additional countries: Algeria, Congo, Equatorial Guinea, Gabon, Libya, Nigeria, and the United Arab Emirates.
OPEC Plus, formed in 2016, includes OPEC members and 10 non-OPEC oil-producing countries, most notably Russia. This new coalition aims to enhance cooperation and better control oil production levels to help stabilize the global oil market and prices, especially during periods of high demand and high supply.
OPEC and OPEC Plus are a significant global crude oil alliance, effectively controlling 40-45% of the global crude oil market. Their policy decisions can influence global oil prices and significantly impact economies worldwide, particularly those heavily dependent on oil imports and exports. By coordinating production levels, OPEC and OPEC Plus aim to better manage oil supplies, maintain price stability, and ensure steady consistent revenue for their member countries.