Playing With Crude Oil Futures Prices Is A Gamble
Michalis 'BIG Mike' Kotzakolios


Defined Tag: Crude Oil Futures Prices.

What does it mean to invest in crude oil future prices? It simply means to forecast (or guess, as the case many be) whether the price will go up or down. If you determine that the price will go up from the current market rate of futures, then you should buy futures at the current market rate (for futures). Once you decide to do this, you will need to enter into a contract to buy those oil shares for a specific price and at a specific point in time in the future. When that time actually arrives, you will have to execute the contract; and, subsequently, you will find out whether or not you lost or gained. This is in stark contrast to stock trading in which traders only trade shares at the market value.

The whole crude oil future investing process appears to be a free for all. Investors guess at crude oil's future pricing, and make promises to buy oil shares at those prices. What happens if the investor changes her mind? What are the consequences if the investor refuses to buy the shares because the crude oil future price is unfavorable? There are agencies in several countries with the responsibility to regulate future prices of crude oil and other commodities.

There are several dozen futures trading markets around the world. They exist in different countries and are governed by that country's rules. However, the international markets are all interconnected, so the rules for trading and setting crude oil futures prices are expected to be similar between countries. The International Petroleum Exchange trades crude oil and other energy commodities. The TOCOM or Tokyo Commodity Exchange is located in Japan. There is the Sydney Futures Exchange in Australia and the Chicago Board of Trade in the U.S. All these markets have rules in place to prevent exploitation of crude oil future pricing.

The government or agency that regulates crude oil future prices varies from country to country. In the United Kingdom, for instance, the Financial Services Authority regulates crude oil futures. And in Sydney, Australia, the Australia Securities and Investments Commission regulates the price of oil. In contrast, in the United States, all regulation is handled by the Commodities Futures Trading Commission. All these agencies and commissions do is make sure that the contracts are executed properly and legally.