Perhaps the most controversial debate of our age is the amount of oil we have left to pump from the earth. Some speculate as many as hundreds of years while others say we may experience an output shortage as early as 2015. On top of this, many speculate that OPEC purposefully manages the outflow of major oil supplies in order to maintain high prices in the markets. The two major types of crude oil that traders and speculators focus on today are Brent crude and West Texas Intermediate (WTI). The WTI crude is used as a benchmark in oil pricing, is most cited in oil prices, and is a very light crude oil. Brent crude, on the other hand, comes from the North Sea, is not light like WTI crude, and prices two-thirds of internationally traded crude oil.
|Crude Oil Contract Specifications|
|Contract Size||1,000 barrels|
|Price Quotation||U.S. Dollars and Cents per barrel|
|Trading Hours||CME Globex: Sunday – Friday 6:00 p.m. – 5:15 pm ET with a 45-minute break each day beginning at 5:15 pm ET|
|CME ClearPort: Sunday – Friday 6:00 p.m. – 5:15 pm ET with a 45-minute break each day beginning at 5:15 pm ET|
|Minimum Price Fluctuation||$0.01 per barrel|
|Product Code||CME Globex: CL|
|CME ClearPort: CL|
|Listed Contracts||Crude oil futures are listed nine years forward using the following listing schedule: consecutive months are listed for the current year and the next five years; in addition, the June and December contract months are listed beyond the sixth year. Additional months will be added on an annual basis after the December contract expires, so that an additional June and December contract would be added nine years forward, and the consecutive months in the sixth calendar year will be filled in.
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.
|Last Trade Date||Trading in the current delivery month shall cease on the third business day prior to the twenty-fifth calendar day of the month preceding the delivery month. If the twenty-fifth calendar day of the month is a non-business day, trading shall cease on the third business day prior to the last business day preceding the twenty-fifth calendar day. In the event that the official Exchange holiday schedule changes subsequent to the listing of a Crude Oil futures, the originally listed expiration date shall remain in effect. In the event that the originally listed expiration day is declared a holiday, expiration will move to the business day immediately prior.|
|Trade At Marker Or Trade At Settlement Rules||Trading at settlement is available for spot (except on the last trading day), 2nd, 3rd and 4th months and subject to the existing TAS rules. Trading in all TAS products will cease daily at 2:30 PM Eastern Time. The TAS products will trade off of a “Base Price” of 0 to create a differential (plus or minus 10 ticks) versus settlement in the underlying product on a 1 to 1 basis. A trade done at the Base Price of 0 will correspond to a “traditional” TAS trade which will clear exactly at the final settlement price of the day.
TAM trading is analogous to our existing Trading at Settlement (TAS) trading wherein parties will be permitted to trade at a differential that represents a not-yet-known price. TAM trading will use a marker price, whereas TAS trading uses the Exchange-determined settlement price for the applicable contract month. As with TAS trading, parties will be able to enter TAM orders at the TAM price or at a differential between one and ten ticks higher or lower than the TAM price. Trading at marker is available for spot month on the last trading day.
Light Sweet Crude Oil (CL) spot, 2nd and 3rd months and nearby/second month, second/third month and nearby/third month calendar spreads
|Settlement Procedures||Physical Delivery – Crude Oil Futures Settlement Procedures|
|Exchange Rules||These contracts are listed with, and subject to, the rules and regulations of NYMEX.|
|Source: CME Group|
Crude Oil Facts
Crude Oil is unprocessed oil that is acquired directly from the ground. It is also a fossil fuel that was made from the remains of decaying plants and aquatic animals in ancient seas. It wasn’t until the invention of the kerosene lamp that the demand for oil emerged. Crude oil futures represent the consummate commodity, as it is the most traded on the markets today. They are also the biggest contracts of a commodity in terms of volume. These crudes are favored because they can produce valuables, such as gas and diesel, due to low sulfur content.
The top producers of crude oil are Russia, Saudi Arabia, and the U.S. Even though the U.S. produces a substantial amount of crude oil, it must depend on imports in order to fulfill its energy demand. All the oil producing countries combined produce almost 75 million barrels of oil a day. Around 650 million barrels of oil have already been produced, but over a trillion barrels in reserves can still be produced as well. Cushing, Oklahoma is the delivery point of crude oil.
Last updated September 2015
Recent Posts on Crude Oil
- Market Dimensions Advisory: Market Action Alert – Crude Spread WTI vs Brent (11/19/2015) - For the last 2 weeks, the WTI crude market has been making another run lower. Looking at the January contract, WTI attempted to hit the $50 barrel mark and fell short, only reaching $49.23.
- The Rath Overlay (Nov 13 2015) (11/16/2015) - Natural Gas continues to put in a small recovery bounce currently trading at $2.30, (Z5) mmBtu, Crude Oil holding at major support at $42.03 (Z5).
- Pre-Dawn Targeting (11-12) (11/12/2015) - 5 levels of support that should have your attention as we head into the 2nd half of the week!