Crude Oil now
At the moment, worldwide, there are more than 40 000 fields producing oil. The largest deposit of oil in the world is located in the US.125 are large, 100 of them provide about 50% of all oil in the world. Large deposits are considered to have amount of over 500 million barrels. Giant are those who have more than 5 billion barrels of oil. To extract the maximum value from crude, it needs to be refined into petroleum products. In the crude oil industry there are oil types (such as light, heavy, sweet and sour), oil names (such as Brent Light Crude Oil and Bonny Light).
Crude Oil supply regions and companies
Among the leading oil producers are Saudi Arabia (most large deposits near Dammam), Russia (mainly in the area of Western Siberia), United States (mainly Texas, California, Louisiana, Alaska, Oklahoma and Kansas, Canada (mainly Alberta), Iran (Persian Gulf), China (mainly in the South China Sea), Norway (North Sea), Mexico (Gulf of Mexico), Venezuela (Lake Maracaibo), Iraq (in the city Kirkuk and Basra), UK (North Sea), Indonesia, United Arab Emirates, Nigeria (in the delta of the Niger River) and Kuwait, the biggest known reserves are in the Middle East.
Companies lieders in producing oil are Devon Energy, Marathon Oil, EOG Resources, Freeport-McMoRan, Noble Energy, Murphy Oil, Pioneer Natural Resources, Denbury Resources, Inc.
Linn Energy, LLC, Continental Resources, Inc., Concho Resources, Inc, WPX Energy, Inc., Exxon Mobil, Chevron Corp, ConocoPhillips, Occidental Petroleum, Apache Corp, Anadarko Petroleum , Chesapeake Energy, Hess Corp.
OPEC, an international cartel of oil-producing countries, is the single most important production-related entity in the global crude oil market.
Oil futures / oil futures options / commodities
Crude Oil futures are standardized, exchange-traded contracts in which the contract buyer agrees to take delivery, from the seller, a specific quantity of crude oil (eg. 1000 barrels) at a predetermined price on a future delivery date. Example of crude oil futures contract is Light Sweet Crude Oil (WTI); Crude Oil (NYMEX:CL).
Crude Oil Futures have monthly expiration. A trader needs to know when is the first notice day and last trading day for crude oil futures. Another factor are the trading hours.
Market Indices for Crude Oil are: OGJ150, NYSE, Nasdaq, S&P 500.
Commodity indices for Crude Oil are: Crude Oil; Crude Oil Brent (Pit) Natural Gas; Gasoline RBOB; Heating Oil.
ETFs for crude oil are: USO - United States Oil Fund; OIL - S&P GSCI Crude Oil Tot Ret Idx ETN; UCO - Ultra DJ-UBS Crude Oil; UWTI - 3x Long Crude ETN; DBO - DB Oil Fund; SCO - UltraShort DJ-UBS Crude Oil; DWTI - 3x Inverse Crude ETN; USL - United States 12 Month Oil; DTO - DB Crude Oil Dble Short ETN; SZO - DB Crude Oil Short ETN; DNO - United States Short Oil Fund; OLO - DB Crude Oil Long ETN; TWTI - Oil Trendpilot ETN; OLEM - Pure Beta Crude Oil ETN; BNO - United States Brent Oil Fund.
Crude Oil Exchanges
Futures contracts for crude oil are traded at the New York Mercantile Exchange (NYMEX), Intercontinental Exchange (ICE), Dubai Mercantile Exchange (DME), Multi Commodity Exchange (MCX), India’s National Commodity, Derivatives Exchange (NCDEX), Tokyo Commodity Exchange (TOCOM).
NYMEX Light Sweet Crude Oil futures prices are quoted in dollars and cents per barrel and are traded in lot sizes of 1000 barrels (42000 gallons).
NYMEX Brent Crude Oil futures are traded in units of 1000 barrels (42000 gallons) and contract prices are quoted in dollars and cents per barrel.
TOCOM Crude Oil futures prices are quoted in yen per kiloliter and are traded in lot sizes of 50 kiloliters (13210 gallons).
Price of Crude Oil
There are periods of time when the price of crude oil is relatively stable and other periods when the price can become volatile, changing quickly and by a significant amount. Crude oil and petroleum products are global commodities and, as such, their prices are determined by supply and demand factors on a worldwide basis, and not only.
Oil, despite several different benchmarks such as Brent and WTI, is a commodity traded on a global market. Fluctuations in the oil price affect all.
Oil is priced in U.S. dollars, so the relative strength of the dollar also impacts the price. If the dollar gains in strength, it gains against everything, including commodities.
How to trade crude oil
Crude oil is known for its heavy intraday volatility. Consumers and producers of crude oil can manage crude oil price risk by purchasing and selling crude oil futures.
If you are bullish on crude oil, you can profit from a rise in crude oil price by taking up a long position in the crude oil futures market. You can do so by buying (going long) one or more crude oil future contracts at a futures exchange.
If you are bearish on crude oil, you can profit from a fall in crude oil price by taking up a short position in the crude oil futures market. You can do so by selling (shorting) one or more future contracts at a futures exchange.
Crude Oil Option Exchanges are divided into two classes - calls and puts. Crude oil call option are purchased by traders who are bullish about crude oil prices. Traders who believe that crude oil prices will fall can buy crude oil put options instead.
As crude oil options only grant the right but not the obligation to assume the underlying crude oil futures position, potential losses are limited to only the premium paid to purchase the option.
How do you hedge the risks
Crude Oil producers can employ a short hedge to lock in a selling price for the crude oil they produce while businesses that require crude oil can utilize a long hedge to secure a purchase price for the commodity they need.
In the international commodities market, investors hedge bets on how much they think the price of oil will increase or decrease down the road. Speculating over the price of oil also has a lot to do with how much it costs. For an investor could be much more profitable trading oil by trusting and using the competence of a professional company money manager.
