Light Sweet Crude Oil (WTI) Futures And Options: Brochure
ENERGYLight Sweet Crude Oil (WTI)Futures and OptionsThe world’s most liquid crude oil benchmark.How the world advances1
As the world’s leading and most diverse derivatives marketplace, CME Group is where the world comes to manage risk. CME Groupexchanges offer the widest range of global benchmark products across all major asset classes, including futures and options based oninterest rates, equity indexes, foreign exchange, energy, agricultural commodities, metals, weather and real estate. CME Group bringsbuyers and sellers together through its CME Globex electronic trading platform and its trading facilities in New York and Chicago.CME Clearing, an industry-leading central counterparty clearing provider, offers clearing and settlement services for exchange-tradedand over-the-counter derivatives. Together, CME Group’s products and services ensure that businesses everywhere can substantiallymitigate counterparty credit risk in both on-exchange and over-the-counter derivatives markets.The Energy MarketplaceIn 2008, NYMEX became part of CME Group. Together, we offer the most extensive and liquid energy complex in the world, includingLight Sweet Crude Oil (WTI), Natural Gas (Henry Hub), petroleum and electricity products. Many of our contracts are benchmarks thatset the price for these resources worldwide. From the world’s largest industrial companies to financial institutions, our diverse universeof participants clear an average daily volume of 1.9 million energy contracts every day on CME Globex, through CME ClearPort or on ourtrading floor — making CME Group the world’s leading energy marketplace.Key Crude Oil and Refined Product ContractsFuturesOptions»»Light Sweet Crude Oil (WTI) (CL)»»Light Sweet Crude Oil (WTI) (LO)»»E-mini Light Sweet Crude Oil (WTI) (QM)»»Light Sweet Crude Oil (WTI) Average Price (AO)»»Brent Crude Oil Last Day (BZ)»»Light Sweet Crude Oil (WTI) Look-Alike (LC)»»Brent (ICE) Calendar Swap (CY)»»Light Sweet Crude Oil (WTI) 1 Month Calendar Spread (WA)»»WTI – Brent (ICE) Bullet Swap (BY)»»Light Sweet Crude Oil (WTI) Daily (CD)»»Dubai Crude Oil Calendar Swap (Platts) (DC)»»Brent Crude Oil (OS)»»Heating Oil (HO)»»Brent Look-Alike Crude Oil (BE)»»RBOB Gasoline (RB)»»Brent Crude Oil Average Price (BA)»»European Gasoline Euro-bob Oxy NWE Barges Swap (7H)»»Brent Crude Oil Last Day Financial 1 Month Calendar»»New York Harbor Ultra-Low Sulfur Diesel (ULSD) (LH)»»Gulf Coast ULSD (Platts) Up-Down Spread Swap (LT)»»WTI – Brent Crude Oil Spread (BV)»»Gulf Coast No. 6 Fuel Oil 3.0% (Platts) Swap (MF)»»Heating Oil (OH)»»Singapore Fuel Oil 180 cst Swap (UA)»»Heating Oil Average Price (AT)»»Singapore Gasoil Swap (Platts) (SG)»»New York Harbor Gasoline Blendstock (RBOB) (OB)»»RBOB Gasoline Average Price (RA)»»Gasoil Average Price (F7)Spread (9C)
A History of Light Sweet Crude Oil (WTI)Futures and OptionsEvery day, around the world, virtuallyresulting in newfound price volatility. Seeingaround the clock, Light Sweet Crudea new need in the market, the New YorkOil (WTI) futures and options marketsMercantile Exchange (NYMEX), now a partaverage 1,000,000 contracts traded —of CME Group, introduced an innovative toolthat translates to one billion barrels ofto provide the oil industry with an effectiveoil. Whether traded on the CME Globexhedge against price volatility — WTI futures.electronic trading platform, on the tradingfloor in New York or cleared through CMEClearPort, WTI futures and options representvital price risk management opportunitiesfor global crude oil suppliers and consumers.Within three years of contract launch,overproduction by the Organization ofPetroleum Exporting Countries (OPEC)dropped oil prices from 32.00 a barrel toHowever, this was not always the case. 9.75 in just five months. As a result, morePrior to the disruptive price shocks of thecontract as a risk management tool. In the1970’s, oil prices were generally stable,press, Exchange-price quotes began to takefollowing traditional, less complicated,precedence over previously accepted pricesupply/demand economics. During thequotations.1970’s, geopolitical issues like the 1973 YomKippur War and the Iranian Revolution of1979 injected radical uncertainty into themarket and shattered price stability, leadingto continuing price increases throughoutmuch of the 1970’s and into the early1980’s. Concurrently, U.S. government priceand allocation controls effectively preventedthe market from responding naturally toany weakness in demand, allowing oilproducing nations to keep upward pressureon prices until controls were lifted in early1981. Over the next two years, the marketbegan responding to supply and demand,and more institutions turned to the WTIFive years later, when Iraq invaded Kuwait inAugust of 1990, the risk of war threatenedto cut off nearly one quarter of the world’soil supply. Prices soared and trading onthe Exchange rallied as oil producers andWTI futures andoptions represent vitalprice risk managementopportunities.secular market trend has been punctuatedby dramatic swings. The financial crisisof 2008, along with the ensuing globalrecession, brought about the sharpestrecorded decline in demand for crude oil.Likewise, massive political unrest acrossthe Middle East in 2011 has led to greatervolatility and unpredictability. In timesof uncertainty, the market flocks to WTI,and steady increases in contract volumehave further reinforced WTI’s function asa global benchmark for crude oil prices. Ascrude oil markets continue to experiencethese changes, the value of hedging withWTI futures has never been greater.buyers sought to sustain appropriate levelsof risk management in a time of extremeuncertainty.Since 2004, global production capacityhas expanded continuously, but oil priceshave experienced a secular rise as awealthier world economy’s appetite forcrude oil outpaces this expansion. Yet this1
Light Sweet Crude Oil (WTI) Futures and OptionsWhen the World Asks, “What’s the Price ofCrude Oil?” WTI is the Answer.WTI (West Texas Intermediate — a lightWTI contract continues to be the mostThe Exchange futures contract provides asweet crude oil stream) consists of aliquid benchmark for the global price of oil.basic unit of account in increments of 1,000blend of several U.S. domestic streams ofApproximately 20 million barrels per day ofbarrels, which gives companies the ability tolight sweet crude oil. The delivery point inNorth American crude oil sales are pricedcustomize the size of their futures position toCushing, Oklahoma, is a vital transshipmentusing our WTI contract as the benchmarkmatch the size of their import cargo. Further,point with many intersecting pipelines,— ensuring it remains the most efficientthere is a highly liquid over-the-counter (OTC)storage facilities and easy access to refinershedging tool for hundreds of internationalderivatives market that is tied to the deepand suppliers. Crude oil flows inbound tocommercial oil companies.liquidity of our WTI futures contract, allowingCushing from all directions and outboundthrough dozens of pipelines. Naturally, thisstrategic position led to WTI’s developmentmarket participants to manage their oil priceAdditionally, in the international crude oilrisk with customized OTC cleared instruments.market, physical oil is transported fromsources as near as Mexico and as far asWTI’s centrality to these markets meansSaudi Arabia in large cargo ships, whosethat its forward price curve, aggregatingcrude oil futures in 1983.capacity ranges from smaller cargoes offutures prices up to nine years forward inapproximately 500,000 barrels to the largesttime, is a mainstay reference on individual,As a pricing mechanism for physicalcargoes of 4 million barrels in ships calledorganizational and macroeconomic scales. Itdelivery of crude oil in North America, WTIUltra-Large Crude Carriers. Typically, theseenables individual investors to strategicallyis firmly rooted in the physical market.oil cargo transactions are hedged usingdiversify investment portfolios, refiners andBecause of the unique immediacy, breadth,tools directly derived from the price of ourother operations using oil as a direct input toand depth of pricing and inventoryWTI contract, which allows commercial oilanticipate supply-demand fluctuations, anddata supplied by the U.S. government,companies to lock in their price for importedeconomists to calibrate the value of nationaland because onshore North Americanoil in varying size increments.oil reserves.as a significant physical market pricereference well before the Exchange listedproduction has been a key driver of growingglobal crude oil supply over the pastdecade, no other crude oil benchmark moreCrude Oil Month-End Settlement Priceaccurately reflects the supply and demandSpot Settlementdynamics of the market.160.00In the U.S. market, physical crude oil is140.00typically bought and sold in incrementsof 1,000 barrels for delivery via pipeline2Jan 11Sep 10Jan 10May 10Sep 09Jan 09May 09Sep 08May 08Jan 08Sep 07May 07Jan 07one-to-one correspondence is why ourSep 060.00the futures and physical markets. ThisJan 0620.00instantaneous price convergence betweenMay 06commercial transactions, offering a nearlySep 0540.00May 05that is tailor-made for standard U.S.60.00Jan 05of 1,000 barrels is a convenient unitSep 04Consequently, our futures contract size80.00May 04barrels per day for the entire month.100.00Jan 04commercial contract specifying 1,000 per barreleach day of the month, with the standard120.00
cmegroup.com/wtiWho Uses the Crude OilFutures Market?A WTI futures contract is the most liquid,marketers can sell futures to lock in pricesInvestors and Speculatorstransparent oil-trading instrument availablefor future delivery, protecting the value ofWith no intention of buying or selling actualto the industry today. Oil is traded worldwidefuture crude oil sales.commodities, investors and speculators tryand the market can be affected by eventsto make money by buying futures contractsOther Oil Industry Participantsanywhere at anytime. To help manage thatat a low price and selling back at a higherWTI futures can be used as a hedgingrisk, market participants can trade WTIprice or by selling futures contracts at a highinstrument to shift exposure to price risk.contracts on CME Globex virtually 24 hoursprice and buying back lower. However, theyRefiners, traders, and marketers will buya day. OTC traders can also have the securityalso take on the risk that prices may changefutures to protect against their exposure toof clearing privately negotiated transactionsthrough CME ClearPort.rising cash market prices.The versatility and wide acceptance of theProfessional Energy Tradersto their disadvantage.Trading listed heating oil and unleadedbenchmark futures contract serves thegasoline contracts in tandem with crudediverse and complex needs of an array ofcrude oil marketplace participants, including:oil futures can lock in the “crack spread,” orCommercial Enterprises with aDirect Stake in the Price of Oilbetween crude oil and refined products. TheThe contract can be a valuable hedgingheating oil/crude oil and gasoline/crude oilinstrument. As a safegaurd against fallingcrack spreads, as well as on each individualcash market prices, producers, traders andfutures contract.the theoretical cost of the refining marginExchange also offers options contracts on theCrude Oil Monthly Volume and Month-End Open InterestVolumeOpen Interest1.6161.4141.2121.0100.880.660.440.2Jul 11Jan 11Jul 10Jan 10Jul 09Jan 092Jul 08Monthly Volume in Millions18Month-End Open Interest in Millions1.8203
cmegroup.com/wtiThe Benefits of Trading WTIwith CME GroupIncreasing Flexibility with Exchange ofFutures for PhysicalsSafe and Secure – Central Counterparty ClearingTo allow market participants to more easily manage crude oil pricemanagement services — giving you the security and confidencerisk, the Exchange provides a trading instrument to complementmarket participants need to operate, invest and grow. For everythe futures contract known as Exchange of Futures for Physicalstrade completed on our Exchange — whether on the floor, on the(EFP). An EFP allows the exchange of a futures position for a physicalscreen or using off-exchange transactions cleared throughposition in the underlying cash market. Such a contract is optimal toCME ClearPort — CME Clearing acts as the counterparty to everydeliver or receive crude oil from a specifically desired counterparty,trade to substantially mitigate counterparty credit risk and virtuallythat does not necessarily conform to the delivery location or gradeguarantee the financial soundness of both parties. By being at thespecification of our WTI futures contract. EFPs, which can benefitcenter of every transaction, we can protect everyone’s interest andboth sides of a transaction, account for most of the deliveries madeensure the integrity of the marketplace.We lead the industry in providing a comprehensive set of risk-against the futures contract. Rather than accepting a randomlymatched partner, as would occur through normal clearing procedures,EFPs allow traders to choose their trading partners while retaininganonymity in the market at large.KEY A DVA N TAG ES OF C ME C L E AR I NGCentral Counterparty GuaranteePerformance Bond RequirementsWhether you trade live on the floor, electronically on CME GlobexAll of our customers are required to put up a “good faith deposit,”or clear privately negotiated trades through CME ClearPort, youror performance bond, to cover the maximum likely loss acredit risk is substantially mitigated as CME Clearing becomesposition could suffer. In turn, our clearing member firms mustthe buyer to every seller and the seller to every buyer.post to CME Clearing at least the maintenance performance 8 Billion in Safety and Soundness*bonds for all positions carried.In more than 100 years of trading, CME Clearing has never hadTwice Daily Mark-To-Market Processa default or a loss of customer funds resulting from failure of aAccumulation of debts/losses is limited and transparency isclearing firm.achieved as CME Clearing marks your futures and optionsSegregation of Customer Fundspositions to market twice daily.Your funds are not subject to creditor claims against your24-Hour Monitoring by an Experienced Risk-Management Teamclearing firm should it become financially unstable or insolvent,A global team of clearing and auditing professionals uses aand can be transferred to another clearing firm if needed.variety of sophisticated tools to carefully observe risk 24 hours aday, seven days a week.* Financial safeguards and collateral levels cited are as of Dec. 31, 2010.5
Light Sweet Crude Oil (WTI) Futures and OptionsWTI Options: Versatility DefinedExpanding Risk ManagementOpportunities with CrudeOil Optionsis obligated to perform, should a buyerholder may choose to allow his optionsexercise the option. If options expire withoutcontract to expire worthless and isbeing exercised, the options seller profits byotherwise able to participate fully in anyWTI options, introduced in 1986, provide yetthe amount of the premium.favorable price move.another hedging instrument for oil tradersto increase their flexibility in managingbusiness risk.If prices are expected to rise, a trader canrefiner the ability to buy farther forward toThe Exchange offers many types of crudemeet his crude oil acquisition requirements,oil options, but in the most liquid variety, thewhile averting the risk of a price increase.holder of an options contract has the right,but not the obligation, to buy or sell a futurescontract at a specified time in exchangefor a one-time payment, or premium. Theseller of an option, on the other hand, has anobligation to buy or sell a futures contract, if aholder of an option chooses to exercise it.All varieties of options exist in two basicforms: calls and puts. A call gives theholder the right, but not the obligation, tobuy futures at a specific price (the strikeor exercise price) within a specific periodWTI options provideanother hedginginstrument forflexibility in managingbusiness risk.buy a call, which, for example, would give aIf crude oil prices are expected to fall, atrader may consider puts, which permit theholder to sell forward crude oil production,protecting his selling price in the event of amarket price decline.A Diverse Options Slate forDiverse Hedging NeedsBecause of the sheer size of the crude oilmarket and the WTI benchmark’s centralUnlike futures, which must either beliquidated or held to delivery, the holder ofan options contract has a third alternative:if the futures price does not move enough tomake exercising the option worthwhile,or moves in the opposite direction, theof time. A put gives the holder the right,position within it, the Exchange offers asophisticated array of option varieties. Eachaugments the flexibility of various hedgingactivities, while affording speculatorsa maximum breadth of strategies toparticipate in an enormously liquid market.but not the obligation, to sell futures at afunction similar to that of an insurancecompany. He collects the premium and650020Month-End Open Interest in MillionsAn options seller (or writer) performs a4Jan 11would be purchased.100Jan 10to protect against a price decrease, a put6Jan 09increase, the hedger would purchase a call;150Jan 08period. To protect against the risk of a price8Jan 07contract’s price risk for the designated time200Jan 06buyer obtains protection against a futures10Jan 05for a one-time, up-front premium, theJan 04purchasing an insurance policy: in returnOpen InterestVolume250Jan 03Buying a call or a put is similar toWTI Options Complex Monthly Average Daily Volume and Month-End Open InterestMonthly Average Daily Volume in Thousandsspecific price for a specific period of time.
cmegroup.com/wtiCrude oil options for ma ximum fle xibilityEuropean-Style WTI OptionsCalendar Spread WTI OptionsAlso known as look-alike or “vanilla” options, this simplest varietyAlso called time spread options, this highly popular type of option:of standard options:»»»»»»»»»»at expirationmay be exercised into cash settlement upon expiration onlyis priced based on the underlying contract’s expected price»»futures positions, one long and one short, on a nearby and atends to trade at a discount to American-style optionsmore distant monthif settled financially, protects the writer from any unexpectedAmerican-Style WTI Options»»expectations for short- and long-term supply-demandmay be exercised into its underlying physically settled WTIfluctuations.affords the opportunity to earn interest on premiumsCrack Spread WTI Optionsrecovered from early exerciseNamed for the “cracking” process that converts crude oil intois the more widely traded standard crude oil option typerefined products, this option type:permits hedgers with a physical oil position to respond more»»rapidly to price fluctuationsAverage Price WTI Optionsmay be financially settled into its underlying WTI calendarswap only at expiration»»is priced based on its underlying contract’s expected averageprice over one month»»»»one long and one short, for the same contract month*»»margins, based on divergent expectations of supply-demandfluctuations for crude oil versus refined productsShort-Term WTI Optionsthe month prior to expirationA low-cost solution for targeting specific nearby points in time,option variety:is priced based on the average price of an underlying strip ofcontracts spanning several monthscosts less than buying separately expiring options for eachmonth at the same strike price»»this variant of the European option:»»»»may be cash settled upon expiration onlyexpires up to five business days forward following the firstcycle week, with a new contract listed another five businessmay be exercised into its underlying financially settledfutures contracts only at expiration»»provides refineries with a hedging tool to protect their profitmirrors the oil industry’s dail
Futures and Options Every day, around the world, virtually around the clock, Light Sweet Crude Oil (WTI) futures and options markets average 1,000,000 contracts traded — that translates to one billion barrels of oil. Whether traded on the CME Globex electronic trading platform
Crude oil demand is how much crude oil is received by the refinery. This crude oil is processed to refinery products like diesel, gasoline, etc. Processing crude oil determines emissions in the crude oil supply (crude oil production and crude oil transport), which then must be attributed (called: allocated) to each product of the refinery.
crude oil and oil-derived products (Mokhatab, 2006; Nazina et al., 2007; Wolicka et al., 2009; Wolicka et al., 2011). 2. Crude oil Environment for microorganisms growth 2.1 Crude oil composition Crude oil is a mixture of thousand of variou s compounds, organic and inorganic, including aliphatic and aromatic hydrocarbons, which in average .
Mercantile Exchange (NYMEX), is commonly used as a benchmark in oil pricing. In Europe, Africa and the Middle East, the benchmark is North Sea Brent crude, which trades on the Intercontinental Exchange (ICE). WTI is also known as Light Sweet crude oil because of its relatively low sulfur (S) content of 0.42% or less by weight.
WTI price 99.9% confidence interval WTI price Prices and returns of Cushing, OK West Texas Intermediate (WTI) crude oil. 99.9 percent confidence interval calculated using daily EWMA volatility estimate (decay factor λ 0.94). Daily, 02Jan1986-16Jan2018. Data source: U.S. Energy Information
Characteristics of Crude Oil The hydrocarbons in crude oil can generally be divided into four categories: Paraffins: These can make up 15 to 60% of crude. Paraffins are the desired content in crude and what are used to make fuels. The shorter the paraffins are, the lighter the crude is.File Size: 560KB
DESALTING, DESALTERS, AND SALT IN CRUDE MONITORING IN PROCESS: AN OVERVIEW Speaker: Dr. Maurizio Castellano B.A.G.G.I Srl . 04 07 2018 Crude Oil and Heavy Crude Oil Salt content in crude ranges: from 5,000 to 250,000 ppm of NaCl according to the water content one may find in Crude oil
complex systems in recent years [2]. They can be applied in the design of crude oil distillation column based on the information obtained from a functioning crude oil distillation column of a refinery. Crude oil distillation is the separation of the hydrocarbons in crude oil into fractions based on their boiling points. It is converted to petrol,
T Readers series, a graded readers series for low-level learners of English. These free teacher’ s notes will help you and your classes get the most from your Shrek Popcorn EL T Reader. Level 1 Popcorn EL based on a 200 headword list. There are no past tenses at this level. T Readers level 1 is for students who are beginning to read in English, Shrek has a total story wor dcount of 546 wor .
