Crude Oil Futures Trading

Crude Oil Futures Trading

Crude oil futures trading started in 1983 on the NYMEX. Currently it is the world’s most heavily traded commodity and the NYMEX crude oil futures contract is the world most fluid medium to buy and sell crude oil.

In the trading of crude oil, there are 2 contract denominations available for trade. They are the CL and the e-miNY.

Today trading crude oil futures is one of the ways you can participate in the global oil market. Every day, billions of dollars worth of oil is traded across the world, and as was stated earlier, The New York Mercantile Exchange (NYMEX) is the hub for trading crude oil and other global energy products.

There are different types of oil futures contract handled by the New York Mercantile Exchange and the light sweet crude oil is the most liquid of all the crude oil contracts. Others include Brent North Sea Oil, Dubai Crude oil ect.

Definitions and Symbols

A standard oil contract is based on 1,000 barrels to be delivered at Cushing Oklahoma. A barrel of oil contains 42 US gallons and is traded in US dollars. The regular trading hours at the NYMEX is from 10:00AM EST to 2:30 PM EST through the open outcry method

After Hours Trading: This starts from 3:15PM EST and ends the following day at 9:30AM EST, MOndays through Thursdays. This trading basically is electronic using the internet trading platform of the New York Mercantile Exchange known as the electronic NYMEX ACCESS System.

Trading unit: Crude Oil Futures trade in units of 1,000 U.S. barrels (42,000 gallons). Options: One NYMEX Division light, sweet crude oil futures contract

SYMBOL:

CL trades in units of 1,000 barrels (42,000 gallons)

The minimum price fluctuation is $0.01 (1¢) per barrel ($10.00 per contract).

QM (e-miNY) trades in units of 500 barrels (21,000 gallons)

The minimum price fluctuation is $0.025 (2.5¢) per barrel ($12.50 per contract

Maximum Daily Price Fluctuation is $10.00 per barrel for open-outcry, and $20.00 per barrel for electronic trading.

Trading Symbol

Futures: CL

Options: LO

Time Table (Trading Months): Crude Oil Futures trade 30 consecutive months plus long-dated futures initially listed 36, 48, 60, 72, and 84 months prior to delivery. Additionally, trading can be executed at an average differential to the previous day’s settlement prices for periods of two to 30 consecutive months in a single transaction. These calendar strips are executed during open outcry trading hours. Options: 12 consecutive months, plus three long-dated options at 18, 24, and 36 months out on a June/December cycle.

Price Quotation

Price quotations for Crude Oil Futures are in dollars and cents per barrel.

Minimum Price Fluctuation: $0.01 (1¢) per barrel ($10 per contract).

Maximum Daily Price Fluctuation

Futures: Initial limits of $3.00 per barrel are in place in all but the first two months and rise to $6.00 per barrel if the previous day's settlement price in any back month is at the $3.00 limit. In the event of a $7.50 per barrel move in either of the first two contract months, limits on all months become $7.50 per barrel from the limit in place in the direction of the move following a one-hour trading halt.

Options: No price limits.

Margin Requirements

Margins are required for open futures or short options positions. The margin requirement for an options purchaser will never exceed the premium.

Last Trading Day

Crude Oil Futures: Trading terminates at the close of business on the third business day prior to the 25th calendar day of the month proceeding the delivery month. If the 25th calendar day of the month is a non-business day, trading shall cease on the third business day prior to the last business day proceeding the 25th calendar day.

Options: Trading ends three business days before the underlying futures contract.

Delivery

F.O.B. seller's facility, Cushing, Oklahoma, at any pipeline or storage facility with pipeline access to TEPPCO, Cushing storage, or Equilon Pipeline Co., by in-tank transfer, in-line transfer, book-out, or inter-facility transfer.

Delivery Period

All deliveries are rate able over the course of the month and must be initiated on or after the first calendar day and completed by the last calendar day of the delivery month.

Alternate Delivery Procedure (ADP)

An Alternate Delivery Procedure is available to buyers and sellers who have been matched by the Exchange subsequent to the termination of trading in the spot month contract. If a buyer and seller agree to take a different approach, other than that specified in the contract specification, they can proceed on that basis only after they have submitted a notice of intention to the exchange.

Exchange of Futures for, or in Connection with, Physicals (EFP)

The commercial buyer or seller may exchange a futures position for a physical position of equal quantity by submitting a notice to the Exchange. EFPs may be used to either initiate or liquidate a futures position.

Deliverable Grades

Specific domestic crudes with 0.42% sulfur by weight or less, not less than 37° API gravity or more than 42° API gravity. The following domestic crude streams are deliverable: West Texas Intermediate, Low Sweet Mix, New Mexican Sweet, North Texas Sweet, Oklahoma Sweet, and South Texas Sweet.

Specific foreign crudes of not less than 34° API or more than 42° API. The following foreign streams are deliverable: U.K. Brent and Forties, and Norwegian Oseberg Blend, for which the seller shall receive a 30¢-per-barrel discount below the final settlement price; Nigerian Bonny Light and Colombian Cusiana are delivered at 15¢ premiums; and Nigerian Qua Iboe is delivered at a 5¢ premium.

Inspection

Inspection shall be conducted in accordance with pipeline practices. A buyer or seller may appoint an inspector to inspect the quality of oil delivered. However, the buyer or seller who requests the inspection will bear its costs and will notify the other party of the transaction that the inspection will occur.

Position Limits

Any one month/all months: 20,000 net futures, but not to exceed 1,000 in the last three days of trading in the spot month.