Q:

What are crude oil futures?

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Quick Answer

Crude oil futures are contracts related to various types of unrefined oil that are traded in global markets. Crude oil, the most traded commodity in the world, is bought and sold primarily on the New York Mercantile Exchange in the United States.

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What are crude oil futures?
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Full Answer

The primary type of oil traded is light-sweet crude oil, sought by refiners because it converts to large amounts of gasoline and other petroleum products. A futures contract, known as a lot, provides for 1,000 barrels of oil. Futures contracts represent legal obligations for buyers and sellers to deliver a product or money at a future date. Traders can sell and buy oil several years in advance of delivery. Futures are considered derivatives because their value comes from the underlying product.

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