Light Sweet Crude Oil Futures Market TradingCrude oil keeps America’s economy running. Currently, crude oil supplies more than 40% of our total energy demands and more than 99% of the fuel we use in our cars and trucks. Crude oil futures are the world's most actively traded commodity, and the NYMEX Division light, sweet crude oil futures contract is the world's most liquid forum for crude oil future trading, as well as the world's largest-volume futures contract trading on a physical commodity. Additional risk management and trading opportunities are offered through options on the crude oil future contract; calendar spread options; crack spread options on the pricing differential of heating oil future contracts and crude oil future contracts and gasoline futures and crude oil futures; and average price options. The NYMEX crude oil future contract may be the most important energy future contract in the world.
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The contract trades in units of 1,000 barrels, and the delivery point is Cushing, Oklahoma, which is also accessible to the international spot markets via pipelines. The crude oil future contract provides for delivery of several grades of domestic and internationally traded foreign crude oils, and serves the diverse needs of the physical crude oil market.
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During the September 11 terrorist attacks the NYMEX was destroyed but within days the crude oil futures and crude oil options markets were trading again. This is a testament to the strength and viability of the energy future markets and the commodity exchanges.
Light, sweet crude oils are preferred by refiners because of their low sulfur content and relatively high yields of high-value products such as gasoline, diesel fuel, heating oil, and jet fuel. The NYMEX Light sweet crude oil future contract is considered by many the premiere oil future contract.
The e-miNYsm crude oil future contract, designed for investment portfolios, is the equivalent of 500 barrels of crude, 50% of the size of a standard crude oil future contract. The contract is available for trading on the Chicago Mercantile Exchange (CME) GLOBEX® electronic trading platform and clears through the New York Mercantile Exchange clearinghouse.
The Exchange also lists for trading electronically a financially settled futures contract for Dubai crude oil; a crude oil futures contract on the differential between the light, sweet crude oil future contracts and Canadian Bow River crude at Hardisty, Alberta; and crude oil futures contracts on the differentials of the light, sweet crude oil future contract and four domestic grades of crude oil: Light Louisiana Sweet, West Texas Intermediate-Midland, West Texas Sour, and Mars Blend.
The Brent blend crude oil futures contract is based on a light, sweet North Sea crude oil that serves as a benchmark grade and widely trades as a differential to the NYMEX Division's bellwether light, sweet crude oil futures contract. Most of the crude oil is refined in Northwest Europe, but significant volumes move to the U.S. Gulf and East Coasts. Complementing the Brent crude oil future contract are an options contract, calendar spread options contracts, and an options contract on the Brent/West Texas Intermediate crude oil futures spread.
The Crude Oil Futures Contracts
New York Mercantile Exchange Middle East crude oil future contract trades with prices quoted in dollars and cents per barrel ($00.00/bbl) and a contract unit of 1,000 barrels. The max/min price fluctuation rules are consistent with the Exchange's light, sweet crude oil future contract as are settlement procedures up through the termination of regular trading, which is the final business day prior to the delivery month. (E.g. September 30 for an October contract).
After the last day of regular trading, final settlement of the crude oil futures contract is based on cash settlement against the cumulative monthly average of the index over the course of the contract month. On the second business day of the contract month, open positions are marked-to-market, based on the average of the index on the first business day of the month. The index for each business day is calculated by the Exchange, averaged with those prices from previous business days in the month, and published on the Exchange website and through other distribution channels. The calculation of the final crude oil futures settlement price is completed on the final business date of the contract month (e.g. October 30 for the October 1998 contract).
The IndexThe New York Mercantile Exchange Middle East crude oil futures index is a calculation based on assessments of Dubai and Oman crude oil published by six price reporting services which include Bloomberg, ICIS-LOR, Petroleum Argus, Reuters, RIM Intelligence, and Telerate. The index is published by the Exchange each business day for the previous business date.
To calculate the index, six assessments are collected for Dubai crude oil and six assessments for Oman crude oil (one for Dubai and one for Oman from each of the six price reporting services). For each of the referenced crude oils, the high and low prices are eliminated and the four middle prices are averaged to determine the Dubai and Oman components of the index. These prices are posted anonymously, without identifying the individual price reporting service. If there are less than five contributions to the index, the outliers are not removed and, if there are less than three contributions, the index is not published for that business date. The components are then averaged together to calculate the New York Mercantile Exchange Middle East crude oil index. The Exchange publishes the Dubai component, the Oman component, the index, and the running average of the index each day.
MEC Index Daily Calculation (formula)Six Dubai Contributions >From Price ReportsSix Oman Contributions >From Price ReportsCalculate Index on Exchange Business Days
Daily Index = (AVG. OF DUBAI*) + (AVG. OF OMAN*) 2
* Remove outliers (high and low) if there are at least five contributions Index is not published if there are fewer than three contributors
The New York Mercantile Exchange owns trade name and trademark rights to The New York Mercantile Exchange Middle East Sour Crude Oil Index ("Index").
Contract SpecificationsLight, Sweet Crude Oil Future ContractTrading UnitCrude Oil Futures: 1,000 U.S. barrels (42,000 gallons).Crude Oil Options: One NYMEX Division light, sweet crude oil futures contract.
Price QuotationCrude Oil Futures and Options: Dollars and cents per barrel.
Trading HoursCrude Oil Futures and Options: Open outcry trading is conducted from 10:00 A.M. until 2:30 P.M.
After hours crude oil futures trading are conducted via the NYMEX ACCESS® internet-based trading platform beginning at 3:15 P.M. on Mondays through Thursdays and concluding at 9:30 A.M. the following day. On Sundays, the session begins at 7:00 P.M. All times are New York time.
Trading MonthsCrude Oil Futures: 30 consecutive months plus long-dated futures initially listed 36, 48, 60, 72, and 84 months prior to delivery.
Additionally, trading can be executed at an average differential to the previous day's settlement prices for periods of two to 30 consecutive months in a single transaction. These calendar strips are executed during open outcry trading hours.
Crude oil options: 12 consecutive months, plus three long-dated options at 18, 24, and 36 months out on a June/December cycle.
Minimum Price FluctuationCrude oil Futures and Options: $0.01 (1¢) per barrel ($10.00 per contract).
Maximum Daily Price FluctuationCrude Oil Futures: $10.00 per barrel ($10,000 per contract) for all months. If any contract is traded, bid, or offered at the limit for five minutes, trading is halted for five minutes. When trading resumes, the limit is expanded by $10.00 per barrel in either direction. If another halt were triggered, the market would continue to be expanded by $10.00 per barrel in either direction after each successive five-minute trading halt. There will be no maximum price fluctuation limits during any one trading session.
Crude oil options: No price limits.
Last Trading DayCrude Oil Futures: Trading terminates at the close of business on the third business day prior to the 25th calendar day of the month proceeding the delivery month. If the 25th calendar day of the month is a non-business day, trading shall cease on the third business day prior to the last business day proceeding the 25th calendar day.
Crude oil options: Trading ends three business days before the underlying futures contract.
Options Strike PricesTwenty strike prices in increments of $0.50 (50¢) per barrel above and below the at-the-money strike price, and the next ten strike prices in increments of $2.50 above the highest and below the lowest existing strike prices for a total of at least 61 strike prices. The at-the-money strike price is nearest to the previous day's close of the underlying futures contract. Strike price boundaries are adjusted according to the futures price movements.
Margin RequirementsMargins are required for open futures or short options positions. The margin requirement for an options purchaser will never exceed the premium.
Trading SymbolsFutures: CL
