Crude oil is the most important energy basic raw material in the world. It can refine fuel oil, heavy oil and other products as well as various types of petrochemical products after fractionation. Therefore, crude oil price has a significant impact on economic development and is an important commodity in the world. At present, the major oil producers are the United States, the Middle East and Russia, while the United States, China, India and Japan are major consumers, but the major crude oil exporters are politically unstable countries such as the Middle East and Indonesia. The crude oil market uses US WTI crude oil as one of the three price benchmarks, and the New York Mercantile Exchange (NYMEX) WTI crude oil futures is the world's most market-focused price indicator.
Contributing factors:
1. Organization of Petroleum Exporting Countries (OPEXC) Production Agreement
2. Production in major producing countries
3. Global economic situation
4. War, blockade, embargo or economic sanctions
5. US Department of Energy’s’ periodic report
6. Inventory
7. Alternative energy development
8. Exchange rate
Advantages:
1. Deep, liquid market
Nearly 1.2 million contracts trade daily, with 2 million + in open interest.
2. Nearly 24-huor electronic access
Manage positions around the clock and react as global events occur.
3. Global benchmark
WTI is the go-to measure of world’s oil prices due to the rise in U.S. production, Asian usage and liftoff of U.S. export ban.
4. Flexibility
Trade using the CLOB, blocks, cleared-only transactions and EFRPs.
5. Futures leverage
Control a large contract vale with a small amount of capital. Used properly, it is a powerful way to increase capital efficiency and exposure.
6. ≥80% margin offsets
Trade with other NYMEX oil contracts for significant savings and precise exposure.
7. Safety & security
Central clearing helps mitigate counterparty credit risk.
8. Physical settlement
NYMEX WTI is closely connected to the spot market, reducing costs.
9. 60/40 U.S. tax treatment
Enjoy 60% long term, 40% short term treatment on capital gains.
