Crude oil is not only traded physically but can also be traded as crude oil contracts (commodities, options, etc.) on commodity exchanges, making it an important investment asset.

Petroleum or crude oil is one of the types of oil extracted from oil fields and can be refined and processed into products such as natural gas, diesel, gasoline, fuel oil, asphalt, fertilizers, and more. Approximately 88% of crude oil is used to produce fuel, while the remaining 12% is used for petrochemicals.

Crude oil is classified according to the region where it is extracted, typically based on its density and relative viscosity. Additionally, crude oil is classified as either sour or sweet, depending on its sulfur content. Currently, the two most popular types of crude oil in the world are WTI (West Texas Intermediate) and Brent. The unit of measurement for crude oil in trade is the barrel.

The role of crude oil is extremely important, as it is a source of energy closely linked to most activities in daily life and production. There are concerns that crude oil will be depleted in the near future, as it is a non-renewable energy source.

The importance of crude oil is also reflected in the weighting of the commodity price index developed by Bloomberg. Energy commodities account for one-third of this index, with crude oil making up 15% (including Brent and WTI).

Source: EIA

Crude oil is not only traded physically but can also be traded through crude oil contracts (commodities, options, etc.) on commodity exchanges, making crude oil an important investment asset.

Investment activities in crude oil through futures contracts have increased in recent years. A measure of activity in the futures market is open interest (OI) on exchanges, representing the number of contracts in a trading session that have not been settled or closed. The OI for crude oil futures contracts traded on exchanges has significantly increased over the past decade on the New York Mercantile Exchange (NYMEX).

Source: EIA, updated quarterly, last updated on March 31, 2024.

Globally, more and more investors are interested in commodity investment through market fund instruments—investing in a basket of commodities. These indices typically establish the weighting of various energy and other commodities to provide diversification. Additionally, exchange-traded funds (ETFs) are becoming increasingly popular with investors, including individual investors, as a way to access commodities as an asset class.

Source: EIA

However, most index funds are "long-only" funds, meaning the value of the fund increases only when the price of the underlying commodity rises. Investors using this tool expect commodity prices to increase and will incur losses if the value of the underlying commodities in the index decreases. Many index-style investment managers do not trade the individual components of the index daily; instead, they buy and hold these investments for months or years, rolling over contracts to avoid physical delivery.

In Vietnam, it is entirely possible to trade crude oil futures contracts through member companies of the Vietnam Commodity Exchange (MXV). In fact, crude oil has attracted significant attention from investors in recent years.

In the first quarter of 2024, the WTI crude oil contract linked to NYMEX remained the most traded product in Vietnam, accounting for 17.4% of the total trading volume at MXV. Following that is the WTI micro crude oil contract, accounting for 12.4%. The data was recorded in the context of crude oil prices rising by more than 16% in the first three months of the year, making it the most liquid commodity globally.

Source: Compiled