Yes, you can buy crude oil as an individual, but almost no one takes delivery of actual barrels. In practice, buying crude oil means buying a financial contract whose value tracks the price of oil: a futures contract, an oil-linked exchange-traded fund, or shares in an oil-producing company. Each route uses a normal brokerage or futures account, and each has its own cost structure, tax treatment, and risk profile. Physical ownership is legal but impractical for individuals because of storage, transportation, and environmental rules.
What You’re Actually Buying
The two main paper routes work very differently, and the choice matters before you fund an account.
Futures Contracts
A futures contract is a binding agreement to buy or sell a set quantity of oil at a set price on a future date. The standard West Texas Intermediate contract on NYMEX represents 1,000 barrels.1CME Group. Crude Oil Futures – Contract Specs At $70 a barrel, that’s a $70,000 notional position, though you only post a fraction of that amount as margin. For retail traders, the CME also offers Micro WTI Crude Oil futures (ticker MCL) representing 100 barrels, one-tenth the exposure with proportionally smaller margin.2CME Group. Micro WTI Crude Oil Futures Overview Futures markets are regulated by the Commodity Futures Trading Commission.3eCFR. 17 CFR Part 3 – Registration
Oil ETFs
Oil-linked ETFs give you price exposure through a regular brokerage account. You buy and sell shares like stocks, and the funds are registered under the Investment Company Act of 1940 with share offerings registered under the Securities Act of 1933.4U.S. Securities and Exchange Commission. Investment Company Registration and Regulation Package
There is a catch. Most oil ETFs hold futures internally and must roll expiring contracts into later-dated ones. When later-dated contracts cost more than near-term ones (a condition called contango), the fund effectively sells low and buys high each roll. The United States Oil Fund (USO) has historically lagged WTI spot returns by several percentage points annually during contango periods. Expense ratios add to the drag, typically 0.35% to 0.85% per year for energy-sector ETFs.5BlackRock iShares. iShares U.S. Energy ETF
Fund structure also affects your taxes. Some commodity ETFs are organized as limited partnerships, which issue Schedule K-1 forms instead of a standard 1099 and complicate your return.6Internal Revenue Service. 2025 Partner’s Instructions for Schedule K-1 (Form 1065)
Other Routes
You can also buy shares in oil-producing companies, purchase options on crude oil futures for limited-risk directional bets, or invest in commodity-focused mutual funds. Each has its own risk and tax treatment, but none require you to handle petroleum.
Opening a Futures Account
To trade oil futures directly, you need an account with a registered futures commission merchant. The process is more involved than opening a stock brokerage account.
Under Section 326 of the USA PATRIOT Act, the firm runs a Customer Identification Program before your account opens, collecting your name, date of birth, residential address, and taxpayer identification number, and verifying them against government-issued ID and, in many cases, public databases or consumer reporting agencies.7Federal Register. Customer Identification Programs For Futures Commission Merchants and Introducing Brokers The firm also screens your name against federal terrorist watchlists.
The New Account Form asks for annual income, net worth, liquid assets, prior investing experience, and risk tolerance. Brokers use these answers to judge whether futures trading is suitable for you given the real possibility of losing more than your initial deposit. Answer accurately. Misrepresenting your finances to qualify for a larger account leads to losses you cannot absorb.
Standard futures accounts and public ETFs do not require accredited investor status. Private oil funds and certain limited partnership offerings generally do: a net worth above $1 million excluding your primary residence, or annual income of at least $200,000 individually ($300,000 with a spouse) for the past two years with a reasonable expectation of the same in the current year.8U.S. Securities and Exchange Commission. Accredited Investor Net Worth Standard
Margin and Why You Can Lose More Than You Deposit
Futures use leverage, and this is where newcomers underestimate the risk. You don’t pay the full contract value upfront. You post initial margin to open a position and must maintain a minimum equity level, called maintenance margin, while the position is open. If the market moves against you and your equity falls below maintenance, your broker issues a margin call. If you don’t meet it quickly, the broker can liquidate your position without your permission.9CME Group. Performance Bonds/Margins
For standard WTI futures in 2026, maintenance margin ranges from roughly $5,100 to $8,800 per contract depending on the month, with near-term months higher.10CME Group. Crude Oil Futures – Margins Initial margin is typically about 10% above maintenance. That looks manageable until you remember you are controlling $70,000 of oil with under $10,000 posted. A $5-per-barrel move against you costs $5,000 on one contract. Losses can exceed your deposit, and you are legally responsible for the shortfall. Micro contracts carry proportionally smaller margins and are the more forgiving entry point.
Placing the Trade, and the Expiration Trap
Once your account is approved, you fund it by wire or ACH. Minimum deposits usually run between $500 and $10,000 depending on the firm and the contracts you plan to trade. What matters more is whether your balance exceeds the margin requirement for the contracts you want.
After funds clear, you select a specific contract month on your broker’s platform and enter a buy or sell order. It routes to the exchange and matches with a counterparty, and you get an immediate confirmation showing your fill price. The position then moves in real time with the market.
Here is the operational detail most guides bury: futures contracts expire. If you hold a standard WTI contract through expiration, you are obligated to take physical delivery of 1,000 barrels at the Cushing, Oklahoma storage hub. To avoid that, you must close the position or roll it (sell the expiring contract and buy a later-dated one) before expiration.11U.S. Energy Information Administration. Crude Oil Prices Briefly Traded Below $0 in Spring 2020 Forgetting to roll is not a theoretical risk. In April 2020, traders who could not exit expiring WTI contracts as Cushing storage approached 83% capacity watched prices fall to negative $37 per barrel. They did not just lose their margin; they owed money for someone to take the oil off their hands.
How Crude Oil Investments Are Taxed
Futures contracts on regulated exchanges qualify as Section 1256 contracts. Gains and losses are split 60% long-term and 40% short-term capital gains regardless of how long you held the position.12Office of the Law Revision Counsel. 26 USC 1256 – Section 1256 Contracts Marked to Market For most taxpayers that blended rate beats holding a stock for less than a year. Section 1256 contracts are also marked to market at year-end, so you report unrealized gains and losses as if you had sold every open position on December 31. It all goes on IRS Form 6781, which flows into Schedule D.13Internal Revenue Service. Form 6781 – Gains and Losses From Section 1256 Contracts and Straddles
ETF taxation depends on structure. A standard ETF organized as a regulated investment company sends a 1099 and is taxed like a stock. A commodity ETF organized as a limited partnership issues a Schedule K-1 reporting your share of partnership income and deductions.6Internal Revenue Service. 2025 Partner’s Instructions for Schedule K-1 (Form 1065) K-1s often arrive late in the filing season. Check the fund structure before buying if tax simplicity matters to you.
What About Physical Barrels
Taking physical delivery is legal but practically reserved for refineries, pipeline operators, and commercial storage companies. Storing more than 1,320 gallons in aboveground tanks (about 31 barrels) triggers the EPA’s requirement for a Spill Prevention, Control, and Countermeasure plan.14U.S. Environmental Protection Agency. SPCC Plan Guidance A single standard futures contract delivers 1,000 barrels, roughly 42,000 gallons, so any delivery puts you into federal environmental compliance immediately. Crude oil is a Class 3 flammable liquid under Department of Transportation rules, so any road transport must meet hazardous materials packaging, labeling, and carrier requirements.15eCFR. 49 CFR 173.120 – Class 3 Definitions Civil penalties for environmental violations reach $68,445 per day under the Clean Water Act and $124,426 per day under the Resource Conservation and Recovery Act after the most recent inflation adjustments, with criminal charges possible if a spill causes damage.16eCFR. 40 CFR Part 19 – Adjustment of Civil Monetary Penalties for Inflation Financial contracts give you the same price exposure without any of that liability, which is why individuals almost always take the paper route.