What Is Crude Oil Trading? Guide for Beginners

Published on December 16, 2025 | 3 min read

Crude oil is a crucial commodity without which the world would come to a standstill, quite literally. Crude oil has become a must-have for most traders due to its volatile nature and impact on other assets and securities.

For example, if crude oil prices increase, transportation-focused sectors will be affected. As fuel costs rise, companies face higher operating expenses, which are often passed on to consumers. This can lead to higher overall prices in the economy, contributing to inflation.

Let’s understand in detail about crude oil as a commodity and beginners can trade in crude oil.

What Is Crude Oil?

Crude oil is a fossil fuel, containing organic material and hydrocarbon deposits. It is non-renewable fossil fuel and is limited in supply. Refined crude oil is commonly used to produce fuels such as gasoline, kerosene and diesel. It is also used for generating electricity, manufacturing steel, and producing plastics, chemicals and synthetic fibres etc.

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What Is Crude Oil Trading?

In crude oil trading, traders buy or sell crude oil or other oil-linked assets to make a profit through price difference. Since crude oil is globally consumed, its extraction, refinement and distribution can be complex. Limited supply of crude oil and certain geopolitical tensions cause fluctuations in its price and the price of other oil-linked assets.

Crude oil prices are highly volatile in nature, which is a benefit for traders as it increases their chances of generating returns. Traders usually trade crude oil through oil futures contracts instead of actually taking delivery due to storage and multiple other issues.

How to Trade In Crude Oil as a Commodity?

Due to the complex logistics of transport and storage concerns of crude oil, the demand for physical delivery of crude oil is quite low. Traders generally prefer to trade crude oil futures contracts on exchanges such as MCX or NCDEX.

If a trader is bullish on crude oil, meaning they think crude oil prices will rise in future, they will buy an oil futures contract with a specific strike price.

For example, a trader sells a crude oil futures contract on January 3 at ₹5,200 per barrel. By the end of the month, the crude oil futures price fell to ₹5,050 per barrel. The trader can then buy back the contract at ₹5,050, earning a profit of ₹150 per barrel from the decline in price.

What Influences Crude Oil Prices?

Before trading in crude oil, it is essential to understand what factors influence its prices and make it so volatile. Let’s explore some factors that affect crude oil prices.

Geopolitical Tensions

The conflicts in oil-producing countries such as the Middle East, Russia and other countries create supply issues and uncertainty, leading to price spikes.

Supply & Demand Factors

Crude oil output by major producers and decisions by the Organization of the Petroleum Exporting Countries (OPEC) significantly impact global supply.

Strong and developing economies like India and China have a high demand for crude oil for transportation and manufacturing purposes. During a recession, demand for crude oil decreases as the economy slows down.

Market Speculation

Market speculation also impacts crude oil prices as traders buy and sell future contracts as per their predictions, which increases volatility.

Dollar Strength

Crude oil is traded globally in U.S dollars. If the dollar strengthens against the Indian rupee, crude oil will become expensive in the domestic market.

How to Invest in Crude Oil?

If you want to invest in crude oil, you can buy stocks of oil and gas companies such as ONCG, Oil India and BPCL, etc. You can also invest in Oil & Gas ETFs that track energy sectors, such as ICICI Prudential Nifty Oil & Gas ETF.

Crude oil is a highly volatile commodity, which makes it difficult to predict its future price movements. For a beginner, trading futures contracts may be challenging and expensive, instead, you can invest in stocks of oil and gas companies or an ETF.

About Author

Mariyam Sara

Sub-Editor

holds an MBA in Finance and is a true Finance Fanatic. She writes extensively on all things finance whether it’s stock trading, personal finance, or insurance, chances are she’s covered it. When she’s not writing, she’s busy pursuing NISM certifications, experimenting with new baking recipes.

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About Upstox

Upstox is a leading Indian financial services company that offers online trading and investment services in stocks, commodities, currencies, mutual funds, and more. Founded in 2009 and headquartered in Mumbai, Upstox is backed by prominent investors including Ratan Tata, Tiger Global, and Kalaari Capital. It operates under RKSV Securities and is registered with SEBI, NSE, BSE, and other regulatory bodies, ensuring secure and compliant trading experiences.