Crude oil has plunged to a new 12-year low, as global markets remain oversupplied with oil. Some analysts say that this maybe an opportunity to buy crude oil. Well, this may not surprise those who already know, how to buy crude oil from the futures market. But, for those who do not know, you can buy crude oil in India.
How to Buy Crude Oil?
You can either place an order directly with your broker or if you have a login and password can directly buy the same online. Now let us give an example of an investor who has a broking account with Sharekhan. Under the category commodity buy and sell, click MCX FO. In the drop down list just enter crude and you can see several futures contract for crude oil.
Now, if you buy the crude oil futures of March 16, 2016, you can see the price traded is Rs 2145. What this means is that you have to settle the crude oil futures by March 16. Similarly, there is a crude contract for Feb, March, April, May and June. What this means is that you have to settle the crude oil contracts on a particular date of that month.
Crude oil is traded in lots and you can buy 100 quantities of crude oil contracts. So, you can buy 100, 200, 300, 400 and so on. You need to check the margin and need not pay the entire amount which is one great features of trading in futures.
So, if you buy 100 quantities of crude oil at Rs 2100, you need not pay Rs 21000 and may end up paying just Rs 2500 or so. This is just indicative and you need to check the exchange rules.
How Crude Oil Price is Determined?
There are basically two reasons how crude oil price is determined in India. One is the international crude oil prices and second is the rupee dollar rates. If crude oil prices go up in the international markets they rally in India as well. On the other hand if the rupee falls against the dollar there is a chance that crude oil in the futures market would also rally.
In the last few months crude oil prices in the futures market has fallen from Rs 3000 to the current levels of Rs 2100.