Crude Oil Trading

Crude oil trading involves buying and selling various types of oil and related assets to generate profit through market price fluctuations.
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Crude Oil Trading
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3 min
18-June-2025

Crude oil is one of the most popular commodities to trade in India — and for good reason. Its global demand never really slows down, which makes it a favourite among both active day traders and long-term commodity investors. The price of crude oil constantly reacts to global events, creating plenty of opportunities to trade. Plus, with India and China being two of the world’s biggest consumers of crude oil, the commodity holds even more importance in the market — both locally and globally.

What is crude oil trading?

Firstly, let us understand what crude oil is. Crude oil is a natural resource existing in underground reservoirs. It is obtained through drilling processes.

In India, crude oil is used as the primary source of energy, with the country being heavily dependent on imports to meet its crude oil demand. Also, crude oil serves as a benchmark for pricing various petroleum products, such as:

  • Petrol
  • Diesel, and
  • Jet fuel

Two significant components of crude oil trading

Crude oil trading mainly revolves around two key global benchmarks — each with its own origin and market influence.
  • Brent Crude Oil and
  • West Texas Intermediate (WTI)

Let us understand them better:

Brent Crude Oil West Texas Intermediate (WTI)
  • It comes from the North Sea, near the UK and is named after the Brent oil field.
  • This type of crude oil is widely used as a benchmark for pricing oil worldwide. 
  • So, when you hear about the price of oil in the news, it is often talking about Brent crude.
  • WTI crude oil comes from the United States, specifically from wells in Texas and nearby areas. 
  • It is also a popular benchmark for oil prices, especially in the Americas.
  • WTI is known for its high quality and purity compared to other types of crude oil.


Both Brent and WTI crude oils are actively traded in Indian commodity markets. Retail investors participate in crude oil trading via futures contracts.

Important features of the crude oil market

The crude oil market is one of the most dynamic and actively traded segments of the global commodities landscape. For Indian investors, understanding its unique characteristics can help make informed trading decisions and manage risks effectively.

Let’s explore the key features that shape the crude oil trading landscape:

  • High liquidity and volatility: Crude oil is among the most traded commodities globally, which means there's constant buying and selling. This high liquidity results in tight bid-ask spreads, while price volatility creates frequent trading opportunities—ideal for both day traders and short-term strategies.

  • Global price influencers: Unlike stocks, crude oil prices are influenced by global events—geopolitical tensions, OPEC decisions, US inventory data, and demand-supply trends. Staying updated on international developments is crucial for crude oil traders.

  • Standardised contracts on Indian exchanges: In India, crude oil is traded primarily on platforms like MCX via standardised futures contracts. These contracts have defined sizes, expiry dates, and margin requirements, which make it easier for retail investors to participate.

  • Currency impact: Since crude oil is priced in US dollars globally, fluctuations in INR-USD exchange rates directly impact domestic pricing and trading strategies.

Understanding these features helps traders stay ahead in the ever-evolving crude oil market.

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How to trade crude oil in India?

In India, crude oil trading is traded using commodity futures contracts on

Let us understand in simple steps how to trade crude oil in India:

Step I: Open a trading account

  • The first step is to open a trading account with a registered broker.
  • Make sure the broker allows commodity trading.

Step II: Choose a contract

  • Select a crude oil futures contract that suits your trading strategy and risk tolerance.
  • Contracts on MCX typically include:
    • Crude Oil Mini (10 barrels)
    • Crude Oil (100 barrels)
    • Brent Crude Oil (100 barrels)

Step III: Place orders

  • Upon choosing a contract, you can place buy or sell orders through your trading account.
  • To trade, you have to specify:
    • The quantity of crude oil contracts you want to trade.
    • Whether it's a buy (long) or sell (short) position.

Step IV: Close positions

  • When you are ready to exit your position, you can place an offsetting order.
  • This usually involves:
    • Selling if you initially bought the contracts or
    • Buying if you initially sold them

Step V: Settlement

  • At the end of the trading day, futures contracts are settled based on the prevailing market price.
  • Profit or loss from your trades will be credited or debited to your trading account accordingly.

What are the crude oil trading timings in India?

Crude oil trading happens from Monday to Saturday in two sessions:

  • Morning session - 10:00 AM to 11:30 AM and
  • Evening session - 5:00 PM to 11:30 PM

What are the various crude oil trading strategies?

Traders can employ various crude oil trading strategies such as

  • Swing trading
  • Buy-and-hold trading
  • Spread trading

Let us understand each of them individually:

1. Swing trading

  • It involves capturing short- to medium-term price movements in the market.
  • Traders aim to profit from the "swings" or fluctuations in crude oil prices over a few days to several weeks.
  • They use technical analysis to identify entry and exit points based on:

Example

A swing trader identifies a bullish trend in crude oil prices on the MCX. They buy a Crude Oil Mini contract at Rs. 4,500 per barrel. As the price rises to Rs. 4,800 per barrel within a week, the trader sells the contract. By doing so, they realised a profit of Rs. 300 per barrel.

2. Buy-and-hold trading

  • It involves purchasing crude oil contracts to hold them for an extended period, typically months to years.
  • All the short-term price fluctuations are ignored.
  • Traders base their decisions on fundamental analysis, such as:
    • Supply and demand
    • Geopolitical factors
    • Economic trends

Example

A buy-and-hold trader purchased a crude oil contract at Rs. 4,000 per barrel. They held it for several months. Over time, as demand rises and prices increase, the trader sells the contract at Rs. 6,000 per barrel.

3. Spread trading

  • It involves simultaneously buying and selling related crude oil contracts.
  • The primary goal is to profit from price differentials or spreads between them.
  • In practice, traders usually exploit spreads between:
    • Different crude oil grades (e.g., Brent vs. WTI) or
    • Different delivery months (e.g., near-month vs. far-month contracts).

Example

A spread trader observes that the price of Brent crude oil is trading at a premium to WTI crude oil on the MCX. They simultaneously sell a Brent crude oil contract at Rs. 5,200 per barrel and buy a WTI crude oil contract at Rs. 5,000 per barrel. As the price spread narrows, the trader closes the positions.

Conclusion

Crude oil trading involves trading Brent and WTI crude oil using commodity futures contracts on exchanges MCX and NCDEX. To gain maximum profits, traders use various strategies, such as swing trading, buy-and-hold trading, and spread trading.

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Investments in the securities market are subject to market risk, read all related documents carefully before investing.

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Broking services offered by Bajaj Financial Securities Limited (BFSL) | Registered Office: Bajaj Auto Limited Complex , Mumbai –Pune Road Akurdi Pune 411035 | Corporate Office: Bajaj Financial Securities Ltd,1st Floor, Mantri IT Park, Tower B, Unit No 9 & 10, Viman Nagar, Pune, Maharashtra 411014| CIN: U67120PN2010PLC136026| SEBI Registration No.: INZ000218931 | BSE Cash/F&O (Member ID: 6706) | DP registration No : IN-DP-418-2019 | CDSL DP No.: 12088600 | NSDL DP No. IN304300 | AMFI Registration No.: ARN – 163403|

Research Services are offered by Bajaj Financial Securities Limited (BFSL) as Research Analyst under SEBI Regn: INH000010043. Kindly refer to www.bajajfinservsecurities.in for detailed disclaimer and risk factors

This content is for educational purpose only.

Details of Compliance Officer: Ms. Kanti Pal (For Broking/DP/Research)|Email: compliance_sec@bajajfinserv.in/Compliance_dp@bajajfinserv.in |Contact No.: 020-4857 4486 |

Investment in the securities involves risks, investor should consult his own advisors/consultant to determine the merits and risks of investment.

Standard Disclaimer

Investments in the securities market are subject to market risk, read all related documents carefully before investing.

Research Disclaimer

Broking services offered by Bajaj Financial Securities Limited (BFSL) | Registered Office: Bajaj Auto Limited Complex , Mumbai –Pune Road Akurdi Pune 411035 | Corporate Office: Bajaj Financial Securities Ltd,1st Floor, Mantri IT Park, Tower B, Unit No 9 & 10, Viman Nagar, Pune, Maharashtra 411014| CIN: U67120PN2010PLC136026| SEBI Registration No.: INZ000218931 | BSE Cash/F&O (Member ID: 6706) | DP registration No : IN-DP-418-2019 | CDSL DP No.: 12088600 | NSDL DP No. IN304300 | AMFI Registration No.: ARN – 163403|

Research Services are offered by Bajaj Financial Securities Limited (BFSL) as Research Analyst under SEBI Regn: INH000010043. Kindly refer to www.bajajfinservsecurities.in for detailed disclaimer and risk factors

This content is for educational purpose only.

Details of Compliance Officer: Ms. Kanti Pal (For Broking/DP/Research)|Email: compliance_sec@bajajfinserv.in/Compliance_dp@bajajfinserv.in |Contact No.: 020-4857 4486 |

Investment in the securities involves risks, investor should consult his own advisors/consultant to determine the merits and risks of investment.

Frequently asked questions

Can we trade in crude oil?
You can trade crude oil through commodity futures contracts on platforms like the Multi Commodity Exchange (MCX). Open a trading account with a registered broker and select a contract that suits your trading strategy.
Is crude oil trading profitable?
Crude oil trading can be profitable for informed traders who practise risk management and stay informed about market developments. However, it also carries risks due to price volatility and external factors impacting oil prices.
Is there a margin requirement for crude oil trading?
Yes, trading crude oil involves margin requirements. These are established by the exchange. You can find the related provisions in SEBI Circular CIR/MRD/DP/54/2017 issued on June 13, 2017.
In which currency is crude oil typically traded?

Crude oil is generally traded in US dollars worldwide. This standardisation makes it easier to compare prices across markets, but it also means currency exchange rates can affect Indian traders’ returns.

What motivates traders to invest in crude oil?

People trade crude oil due to its high liquidity, global demand, and frequent price movements. It offers short-term profit opportunities and serves as a hedge against inflation or geopolitical risks.

What is the minimum investment needed to start crude oil trading?

The amount depends on the futures contract size and margin requirements set by exchanges like MCX. Typically, you can begin trading with a few thousand rupees as initial margin, but costs may vary.

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