What are Brent and Urals oil futures. Oil futures trading

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Oil futures are contracts for the purchase or sale of "black gold" in a clearly defined quantity, agreed quality and at a fixed price, which is relevant at the time of signing the contract. Futures provide for the sale of fuel in a strictly regulated volume, which is commonly called a contract. The financial instrument is used to insure market players against unexpected price fluctuations.

Oil futures trading: what to look for?

When buying or selling oil futures, you need to analyze a large amount of information that will allow you to predict the direction of price movement in the near future. On the eve of the conclusion of futures agreements, it is required:

• preliminary assessment of inflation rates;
• assessment of the state of the resource base in the medium term;
• exploring the possibilities of making technological decisions that may affect the cost of production and transportation of fuel;
• studying the political situation of countries that are engaged in oil production and itspumping.

Trade specifics

All oil futures can be traded through terminals. When buying a certain amount of oil at a set price and a certain brand, it is not necessary to think about a place to store fuel or have direct contact with it. The fuel delivery contract is resold until it expires. The trader earns or loses on the difference in price at different intervals. For the convenience of traders, contracts for the purchase or sale of oil are indicated by quotations, which may vary depending on the brand of the product being bought or sold. Each broker offers different symbols depending on the brand of the product.

Introducing varieties

Each grade of oil has its own characteristic composition with a certain amount of impurities and sulfur concentration, and has a certain list of properties. These parameters determine not only the quality, but also the level of uniformity of the composition.

Brent oil futures have been the most demanded among traders for many years now. This is "black gold" from Britain and the USA. The marker standard also includes the following fuel grades:

• WTI (USA);
• Light Sweet (USA);
• Urals heavy (Russia);
• Siberian Light light (Russia);
• Statfjord (Norway);
• Kirkuk (Iraq);
• Iran Light (Iran);
• Iran Heavy (Iran).

Any Forts oil futures (terms market) offers to buy to all interested parties. To start trading you will needstart-up capital and basic software.

Brent and Urals oil futures

The most active in the international market traded futures for oil of American brands Brent and Light. The cost of these fuel grades is used to calculate other fuel grades. The result of this approach to financial instruments makes futures for Brent and Urals oil interrelated, since the market value of the latter is calculated based on the value of the former. Thus, the US plays the role of "regulator". One decision of the state authorities can change the fate of entire industries in other countries of the world.

Due to the huge number of factors that can modify oil futures, only reference types of the product are considered to assess the situation on the market. They are traded on the largest commodity exchanges:

• NYSE;
• London Exchange;
• Singapore Stock Exchange.

The opportunity to trade fuel offers the Forex market and individual dealing centers. The service can be provided by large international companies.

Specifics of futures trading on the Forex market

Public and most acceptable is trading in oil futures within the Forex market. The trading process is reminiscent of the manipulation of currency pairs. The difference is noticeable only in the amount of leverage and in the amount of margin. One contract expresses the price for 100 barrels of oil in US dollars andprovides for the transfer of fuel to the buyer. Until the moment of delivery, the matter does not reach, since the trader sells non-oil before the expiration of the contract for its purchase.

Brent oil futures are referred to as CFDs. They are usually referred to as over-the-counter financial instruments. They provide for cash settlement and have a specific date for their expiration. Depending on the broker, contracts for oil of different grades will have their own quotes. You need to study the nomenclature before the conclusion of the contract.

The main players in the derivatives market are hedgers and speculators. Hedgers are usually called players who are directly related to the extraction, processing and transportation of oil and oil products. By participating in the auction, they completely avoid the risks associated with falling fuel prices. Speculators earn on the difference in the value of contracts. They buy oil on pullbacks and sell it as soon as it rises a little.

Is the game worth the candle?

Brent oil futures or contracts of any other brand of fuel as a trading instrument can make good money. The risk is much greater than when trading currency pairs. The essence of the trade itself is simple. It is necessary to purchase contracts as cheaply as possible, and sell them at a higher price. High rates of return and risk are due to the large volumes of goods sold.

All that is required from a novice trader in this segment is registration onan exchange that provides access to trading on the derivatives market. Alternatively, you can contact a dealing company that has direct access to futures trading. It is more profitable to cooperate with a dealer. For 2% of the transaction amount, the intermediary will take care of all the details of tax and billing.

The oil trade has become incredibly profitable lately. This is due to the fact that the price charts have reached their all-time highs this year. Despite the pullbacks that can be observed today, and the achievement of the mark by some grades of fuel at $69 per barrel, experts call the situation temporary. Everyone is talking about a strong pullback. In the future, another long rise in prices and the formation of new historical peaks are expected.