Oil is one of the most widely traded commodities in the world, providing a highly liquid asset class with a variety of trading strategies. It is also a volatile commodity, so it offers traders plenty of opportunities to realize large profits if they can successfully time the market.URL :theinvestorscentre.co.uk

Oil futures are contracts to buy or sell a specific quantity of crude oil at a specified price on a specific date in the future. They are the most popular product for speculating on the price of crude oil and come in two varieties, Brent Crude and WTI. The most active and liquid of these is West Texas Intermediate (WTI), which is trade on the CME Group’s New York Mercantile Exchange under the ticker symbol “CL”.

Top Economic Indicators to Watch in Oil Futures Trading

Because oil futures represent a specific amount of physical crude oil, their prices tend to follow spot market prices very closely. This relationship between prices in the futures and in the spot market is known as parallelism, and it is a key element in arbitrage and hedging strategies.

Many companies that rely on the production and transportation of crude oil take out futures contracts to hedge their risks, as well as stabilizing costs in a volatile market. These include petrochemical manufacturers that use crude to produce plastics and other products. Traders use weekly inventory reports from the U.S. Energy Information Administration, data on domestic and global crude oil production and consumption, and economic activity to forecast future prices.