History Of Oil Futures Trading In The Us
The history of oil futures trading in the US began in the year 1978 with the trading of heating oil futures in the New York Mercantile Exchange. This was the first energy related commodity to use in futures trading. Thereafter, crude oil futures trading began in the year 1983 followed by unleaded gas futures in the year 1984. |
The trading of oil futures in the NYMEX was the first time that future trading in the energy market was successfully done. In the 1970s, New York was the world's finance hub and with NYMEX being located in the city, it helped the oil future trading to become a success. In addition, this trading was successful as there was volatility in the price of oil which had never occurred before. This fluctuation in the price of oil occurred due to problems in the Middle East, and the buyers and sellers saw oil futures as an excellent way to hedge their losses. (See Reference 1)
In the last few decades, the daily volume of oil futures has increased significantly in the NYMEX; in addition, there is a rise in open interest in oil futures. Open interest is the contracts that various buyers and sellers have entered into, but these contracts have not been closed as yet. Heating oil futures are even traded at the ICE Futures Exchange where the contracts are same as those traded at the NYMEX. However, the New York Mercantile Exchange is the market leader for oil futures trading as the volume of contracts traded here are much higher than what is traded at the ICE Future Exchange. (See Reference 1)
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History Of Oil Futures Trading In The Us
Oil futures are a kind of financial contract entered between the buyer and seller for a specific volume of oil for a particular price, which has to be paid by a specific date. This kind of trading is done by speculative investors, who try to speculate on which way the price of oil will move. In addition, crude oil futures trading is also done by producers, who use the trading as a way to hedge their risk of owning the oil. Generally, the contracts entered are closed before they expire.