Oil exchange trading

Oil exchange trading

Very often from news articles we can hear about the change in the price of oil, and for some reason it is on black gold is concentrated quite a lot of attention of journalists and analysts. What's going on?


Explaining such trends is quite simple. First of all, oil attracts such attention due to the versatility of this raw material. After all, not only is the invention of the internal combustion engine oil products used in any unit, as fuel, and also a wide range of materials is produced in the process of distillation of the "blood of the earth." It's a variety of lubricants and plastics and more.


Secondly, the economy of many states, including Russia, is quite dependent on the price of black gold. Given this interconnectedness, oil is often one of the indicators of the value of many securities.


Therefore, and also for the simple reason that oil is very volatile and extremely liquid, this raw material is considered one of the most popular among investors and traders from all over the world.


How and where is oil traded?


Today it is hard to imagine that brokers in jackets and white shirts rolled a barrel of black gold to the building of the exchange to sell it to others, but many still believe it. In fact, oil trade is not the case. Most of the futures contracts for the supply of oil, i.e. derivative securities, are traded on the stock exchange. Moreover, the trade of "new coal" has long been standardized not only in terms of unit volume, but also in quality.


As for the place where oil is traded, everything is quite prosaic here. Physical trade with the spread of the Internet has faded into the background, giving way to online trading. But despite this, almost all oil traded today, even through the Internet is sold through only three exchanges. These are ICE Futures Europe, CME Group CME Group Inc. and Shanghai Futures Exchange, which have divided almost the entire global market geographically. The first sells oil in Europe and Africa, the second - in the New World, and the last, Shanghai, in Asia.


Of course, oil is traded on many other exchanges, including Moscow or St. Petersburg, but the main flow of world trade takes place through three named giants.


The specifics of futures contracts


As we have already said, today there is no physical oil trade, instead you sell and buy futures contracts for supply. Thus, if you know that oil has fallen in price today, and will grow tomorrow, you buy a contract to supply a fixed number of barrels of raw materials in a certain period of time. If you have not sold your futures for this term, you must "accept" oil or pay for the extension of the term, and if you have made a sale, you take the difference.


It is because of this mechanism that the price of oil constantly jumps from this or that information guide, because this is regarded by many traders as a signal to rise or fall in the price of black gold.


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