Crude Oil Futures Trading in India

Are you a trader or investor who has been actively engaged in the commodity markets? If yes, you need to get an insight into the futures of crude oil trading. Crude oil is considered one of the most significant commodities to trade in the country due to its constant worldwide demands. The demand for crude oil globally makes it a top-notch commodity in India and beyond.

The price volatility of crude oil has profound repercussions across the world. That is why crude oil has become a popular alternative in commodities markets among short-term and long-term traders. India and China are the two countries having the maximum amount of crude oil consumption. Welcome to this post, where you can learn about the futures of crude oil trading in a nation like India.

An Introduction to Crude Oil: What Is It?

Crude oil is nothing but a naturally occurring petroleum. It’s an unrefined version of petroleum, a fossil fuel that includes hydrocarbon deposits and organic materials. The two most significant reasons why the demand for crude oil is growing at lightning speed are: (1) it can be produced in high quantities, and (2) it’s a non-renewable resource.

Refining crude oil is not challenging – it can be produced in high quantities in the form of diesel, gasoline, and kerosene. It is used for manufacturing fertilisers, steel, and plastics. Additionally, it’s a non-renewable fossil fuel so it cannot be recycled once it gets used.

Top Things to Lean on Its Working Process: How Does Crude Oil Trading Work?

In general, the trading market involves two most significant components. One is the Brent Crude Oil, while the other is the West Texas Intermediate. As crude oil happens to be non-renewable, it remains unaffected by the demand and supply factors. That leads to significant fluctuations in the price. The best part of crude oil trading is that it creates volatile trading conditions that most traders prefer.

Considering the Brent or WTI categories, one can find different individual oil products for trading. They include oil futures market CFDs and spot oil. Each product comprises unique features and comes with its own share of risks. So, traders must understand these features and risks before their investment. Each trader must understand the dynamics of the oil market and implement robust trading strategies.

Top Features of Crude Oil: Things to Learn

A highly volatile commodity, crude oil offers longer trending changes than other commodities. But crude oil trade is mostly for speculation instead of delivery until and unless you don’t run a company like BPCL or IOC. Before trading crude oil, understanding the several reasons that cause price changes in crude oil derivatives is imperative. On this note, you may discover the following features considering the unique crude oil market:


One of the most actively traded commodities worldwide, crude oil is used for manufacturing purposes of different products. So, a shift in the price indicates the price change of the products too.


Oil prices may fluctuate at higher rates than other communities, which makes the oil market volatile. Nevertheless, the volatile nature of the oil gives myriad trading opportunities to day traders.

Besides, the laws of demand and supply are prime parameters influencing crude oil pricing. Like other commodities, its price is also affected by storage capacities, interest rates, and production costs. In recent years, oversupply and constant demand have increased its cost.

On the other hand, announcements by OPEC or the Organisation of Petroleum Exporting Countries may also influence its price. Note that OPEC is a company that comprises countries making the largest production of oil. Their announcements may change the expectations and decisions of investors within short-term changes.

Did you know that the US dollar plays a crucial role in oil trading worldwide? That means the value of US dollars can influence the price of crude oil. Besides, natural calamities or political turmoil in oil-producing industries like the Middle East may impact the pricing of crude oil.

Top Ways to Trade Crude Oil: Outlining Two Most Significant Examples

The need for crude oil supply in the near future is higher than the demand for it in the current market. Since transporting the oil involves complex steps, investors are unlikely to accept faster delivery. That's the reason the futures contracts have become more popular among both investors and end-users. The futures contract of any commodity requires a trader to commit to sell or purchase a particular amount of crude oil at a predetermined price on a specific day. If you want more clarity in understanding it, here are two examples that help you understand the matter in brief.

1st Example: Understanding Community Trading for Managing Risks

Suppose a farmer grows wheat and sells it in the market at 500 rupees for each quintal. So, that's a great profit from the farmer's end. Now, the farmer also has tons of rice to sell. You need to ensure you do not lose money in case the wheat price falls. To protect yourself against losses, you can get into a future agreement and decide on selling your wheat at Rs. 500 per quintal at a specific future date. This practice is referred to as hedging.

2nd Example: Commodity Trading for Anticipations

Presuming that you are the trader interested in the futures trading of crude oil. You have an optimistic mindset considering the trading option. So, you think that the price of crude oil will increase in the near future. Suppose, currently, 100 barrels of crude oil cost Rs. 250000. That means each barrel of crude oil costs Rs. 2500. In that case, you need to pay at least 5% of the margin, which is Rs. 12500.

Now, what if the price of crude oil increases to Rs. 2550 for each barrel? In such a circumstance, you may earn Rs 50 profit on each barrel. Thus, your total profit becomes Rs. 50 x 100, i.e. Rs. 5000. So, just by investing Rs. 12500, you can make a profit of Rs. 5000.

Even if there's a falling price in crude oil globally, you can still make a profit. Take this example: suppose you bought the contract with Rs. 4520 on 1st December. By the end of 30th December, the oil price decreased from Rs. 4520 to Rs. 4420 for each barrel. You may sell the futures at Rs. 4520 and earn a profit of Rs. 100 on each barrel. That means the net profit becomes 100 x 10000 (for barrels), which is Rs. 10 lakhs. From the above example, it is clear that traders need to find the most appropriate exchanges for a desired oil benchmark to trade oil futures.

A Concluding Thought

Given the considerable volatility of crude oil prices, their fluctuations are influenced by various things. The demand and supply dynamics can be the prime reason behind the volatility of crude oil prices. In certain situations, geopolitical conflicts can also impact the pricing. So, as a trader, your prime responsibility is to invest in crude oil trading by implementing a solid trading plan. Developing a carefully planned trading strategy is critical in managing the risks associated with the commodity. This way, you can actively engage in this commodity market by stepping into this commodity trading world.

Frequently Asked Questions Expand All

Multi Commodity Exchange of India Limited is the first listed commodity derivatives exchange. What it does is facilitate online trading of commodity derivatives transactions. One can use the platform to discover prices and manage risks. On this platform, crude oil is on the basis of ‘per barrel.’ Other details you need to consider are the following:

  • 1 Barrels is 159 litres
  • Price Quote means per barrel
  • The lot size is 100 barrels
  • P&L per tick is Rs.100
  • Tick Size is Rs.1 (the minimum price change between the offer prices and different bids)
  • The expiry date is the 19th or 20th of each month
  • Each contract will last for six months
  • Mumbai / JNPT Port (Physical Delivery)
  • Delivery units are 50,000 barrels

The top four strategies are:

  • Swing trading: Buying and holding a particular commodity for a short timeframe (a few minutes or 3-4 days)
  • Technical analysis trading: Investors can consider specific technical indicators for trading, including trading volume, bar charts, and candlesticks
  • Buy-and-hold trading: It’s the most popularly used trading strategy where traders evaluate the supply and demand parameters before taking calculated positions
  • Spread trading: Lastly, traders use this trading strategy to buy a crude oil futures contract in a month and sell another contract in another

Yes, retail investors may choose crude oil trading, which involves minimal investment. It allows investors to earn profits due to excessively high leverage. However, the crude oil futures are highly volatile besides being highly liquid. So, crude oil price forecasting becomes challenging. At first, the retail investor needs to consult the broker for this type of trading and eventually move on on their own.