Crude Oil

Crude Oil Product Overview

Crude oil is one of the most economically mature commodity markets in the world. Even though most crude oil is produced by a relatively small number of companies, and often in remote locations that are very far from the point of consumption, trade in crude oil is robust and global in nature. Nearly 80% of international crude oil transactions involve delivery via waterway in supertankers. Oil traders are able to quickly redirect transactions towards markets where prices are higher.

Understanding Crude Oil in the United States

NYMEX WTI Crude Oil futures is the world’s most liquid crude oil benchmark, providing access to global crude oil pricing with the most diverse set of futures and options contracts.

With WTI competing directly in the global energy markets as the price discovery leader, open interest continues to grow as customers hedge their oil market risk.

Volumes on NYMEX WTI Crude Oil futures (CL) and Crude Oil options (LO) have been strong, in part reflecting the higher levels of volatility in both crude oil and refined products.

U.S. Gulf Coast

The infrastructure investment in the U.S. Gulf Coast has transformed WTI into a waterborne crude, with extensive export capacity. The U.S. Gulf Coast comprises approximately 55% of the U.S. crude oil storage capacity, while Cushing comprises 13%.

The Houston market has become export-focused, with a terminal network with storage capacity of 65 million barrels and an additional 20 million barrels of storage capacity projected to come into service in 2017.

The WTI-Brent spread has become a true indicator of value for U.S. crude exporters. With the spread trading between a $1 and $2 per barrel discount to Brent, increased volumes of WTI-linked crude oils may flow to countries outside of the U.S. and Canada.

Weekly options

Weekly Energy options are available for trading with greater precision, allowing for the greater customization of risk management with increased savings and more strategies.

1. Weekly Energy Options allow for:

2. Flexibility to manage short-term volatility and risk

3. Precision timing to target specific market movements or events

4. More expirations: four weeklies and one monthly

5. More ways to limit exposure

6. Shorter expirations to gain market exposure at a lower premium

Click here for Crude Oil Strategies.

Related Videos

What is WTI Crude Oil
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  • Understanding the Henry Hub
  • Managing Risk in the Capacity Market
  • Energy Market and Risk Management with Options

Source: CME