As TheOptionsGuide.com explains, oil futures are standardized, exchange-traded contracts in which the contract buyer agrees to take delivery, from the seller, a specific quantity of crude oil (eg. 1000 barrels) at a predetermined price on a future delivery date.
Crude Oil futures can be traded at New York Mercantile Exchange (NYMEX) and Tokyo Commodity Exchange (TOCOM).
Producers and consumers of crude oil can manage crude oil price risk by purchasing and selling crude oil futures. Crude Oil producers can employ a short hedge to lock in a selling price for the crude oil they produce while businesses that require crude oil can utilize a long hedge to secure a purchase price for the commodity they need.
Crude Oil futures are also traded by speculators who assume the price risk that hedgers try to avoid in return for a chance to profit from favorable crude oil price movement. Speculators buy crude oil futures when they believe that crude oil prices will go up. Conversely, they will sell crude oil futures when they think that crude oil prices will fall.
Learn more about crude oil futures & options trading at TheOptionsGuide.com.
Check out some Tips For Getting Into Futures Trading shared by Investopedia.