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Oil market opens up as retail traders pour in

CME Group to launch 10-barrel contract after Iran war triggers rush of bets on crude prices
00:00

{"text":[[{"start":6.45,"text":"The Iran war is about to democratise the oil market, as the world’s largest derivatives exchange makes it much easier for individuals to bet on crude prices after wild swings during the conflict attracted a wave of retail traders."}],[{"start":20.75,"text":"Chicago-based CME Group has said retail traders will be able to buy and sell contracts for just 10 barrels of oil — currently worth around $700 — with trading available around the clock, seven days a week, from the end of August."}],[{"start":35.35,"text":"The move comes after popular crypto-trading platforms such as Hyperliquid and Binance began offering retail traders 24/7 access to commodity-linked products. "}],[{"start":46,"text":"Once the preserve of oil companies, commodity traders, banks and hedge funds, the oil market experienced a rush of activity among retail traders trying to bet on sharp price moves following the outbreak of the war at the end of February."}],[{"start":59.75,"text":"Crude futures allow traders to lock in or speculate on the future price of oil and have long been used by oil companies, refineries and airlines, among others, to hedge against price swings. They are also used by financial traders such as hedge funds to bet on whether prices will rise or fall."}],[{"start":77.95,"text":"CME’s standard futures contract represents 1,000 barrels of oil, while a “micro” version is 100 barrels. The new 10-barrel contract in West Texas Intermediate crude, the US benchmark, will make trades more accessible to smaller players. "}],[{"start":95.7,"text":"Oil is in a period of “highly engaged interest”, said Peter Keavey, CME’s head of energy, with an 11-fold surge in March compared with a year earlier in the trading volume of the existing micro contract — currently “the purest barometer of retail participation”. "}],[{"start":110.85000000000001,"text":"He added: “Clearly, there’s capacity there for a very large increase.” "}],[{"start":115.80000000000001,"text":"Paul Horsnell, an independent energy analyst and chair of the Oxford Institute for Energy Studies, said “a lot of extra retail money” had come into the oil market, and may have played a role as crude prices have tumbled in recent weeks, despite continuing risks to shipments from the Middle East. "}],[{"start":null,"text":"

Column chart of Micro WTI contract (average daily trades) showing Iran war triggers surge in smaller oil trades
"}],[{"start":133.9,"text":"The new 10-barrel contract is a “much easier bite-size” for retail traders, added Horsnell, and would allow them to get direct exposure to oil prices, rather than having to buy oil company stocks or exchange traded funds that track price moves."}],[{"start":149.6,"text":"Retail investment platforms have also reported a jump in oil trading. "}],[{"start":153.9,"text":"IG Group said the number of oil trades had risen almost sevenfold over the course of the conflict compared with a year earlier, and accounted for 13 per cent of all activity on its platform between March and May. "}],[{"start":168.05,"text":"“With oil in the news so much, there was bound to be a surge in interest,” said Chris Beauchamp, IG’s chief market analyst. He said activity surged over the weekend at the start of the war and as efforts towards a ceasefire intensified. "}],[{"start":184.25,"text":"Trading platform eToro said the number of oil trades it handled was nearly 16 times greater than a year earlier in the three months after the war began on February 28, as users bet on the length of the conflict and how badly oil supplies would be affected. In contrast, gold trading fell 36 per cent as investors rotated away from the metal as it fell from record highs hit in January. "}],[{"start":207.9,"text":"The new CME contract reflects “a wider trend in the market”, said Lale Akoner, eToro’s global market strategist, with retail and smaller active traders seeking oil exposure in “smaller and more manageable trade sizes”. "}],[{"start":222.45000000000002,"text":"But he added: “The real question for exchanges and platforms is whether the demand will continue once the headlines begin to fade.”"}],[{"start":229.9,"text":"Keavey at CME said he was unable to predict whether the volatility that has attracted retail traders would continue, but said interest among retail platforms was still growing. "}],[{"start":241.70000000000002,"text":"“It is just a lot easier now to trade a futures contract than it was 10 years ago. When that [interest] starts maturing, I don’t know, but I think we’re positive on the trend,” he said."}],[{"start":259.25,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1783248245_1297.mp3"}

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