Yes, you can buy crude oil in the United States as a private individual, and nothing in federal law bars you from owning a barrel of it. In practice, almost everyone who wants exposure to the price of oil does so through a brokerage account rather than physical barrels, because the storage, transport, and environmental rules around the actual substance are built for industrial operators. The realistic options are commodity ETFs, shares of oil companies or royalty trusts, and futures contracts.
Is It Legal to Buy Crude Oil as an Individual
Ownership of crude oil splits into two things: a financial interest tied to oil’s price, and physical possession of the liquid itself. Both are legal. The barrier is logistical. Crude trades through commercial supply chains built for refineries, pipeline operators, and industrial buyers, and the spot market runs on private contracts between companies that already have storage terminals and transport in place. An individual who wants to buy ten barrels breaks no law, but will not find a seller set up to sell them.
There is one form of direct ownership that has always been open to individuals: mineral rights. Land in the U.S. can be split between a surface estate and a mineral estate, and if you own the mineral rights where oil exists underground, you own that oil in place. Mineral rights can be bought and sold separately from the surface, and holders typically lease them to a drilling company in return for royalty payments. It is one of the oldest ways private citizens have held a direct interest in crude.
How Individuals Actually Invest in Oil
For everyone else, oil exposure comes through financial products. Three categories cover almost all of it, and they differ in how closely they track the price of a barrel, how much leverage they carry, and how they are taxed.
Commodity ETFs
Exchange-traded products like the United States Oil Fund (USO) let you track oil through a normal brokerage account. USO is a limited partnership that holds oil futures, and each share represents a fractional interest in that portfolio.1Securities and Exchange Commission. 424B3 – United States Oil Fund, LP Shares trade on a stock exchange the same as any ticker, and the funds file regular disclosures with the SEC.2Investor.gov. Form 10-K
The catch that surprises new buyers: these funds don’t track the spot price of oil the way you’d expect. Because they hold futures, they have to roll contracts forward before each expiration, selling the near month and buying the next. When oil markets are in contango, meaning further-out contracts cost more than nearer ones, every roll loses a little. Over years the drag can be severe, and the fund can lag the headline oil price by a wide margin.
Oil Company Stocks and Royalty Trusts
The most straightforward path is buying shares of energy companies. Producers, refiners, and oilfield service firms all trade on public exchanges, and their prices generally move with oil, though company-specific factors like debt and management decisions matter too.
A less common option is an oil royalty trust. These entities own non-operating mineral interests and pass nearly all revenue through to unit holders as distributions. The Permian Basin Royalty Trust, for instance, trades on the New York Stock Exchange and pays monthly distributions based on net revenues from its properties.3Securities and Exchange Commission. Permian Basin Royalty Trust Unit holders are treated as owning the trust’s assets directly for tax purposes, which brings a depletion allowance that can shelter some of the income. The tradeoff is that no one is reinvesting to replace reserves, so production and distributions decline as the underlying wells deplete.
Futures Contracts
Futures are the most direct way to trade oil’s price, and the riskiest for an individual. One NYMEX WTI crude oil contract represents 1,000 barrels.4CME Group. Crude Oil Futures – Contract Specs At $70 per barrel that’s a $70,000 position, and you don’t have to put up the full amount. Maintenance margin runs around $4,500 per contract, so you control roughly $70,000 of oil with a fraction of that in your account.5CME Group. Crude Oil Futures Margins The leverage works both directions.
Futures fall under the CFTC, which imposes spot-month position limits stepping down to 6,000, 5,000, or 4,000 contracts depending on proximity to expiration.6CFTC. Position Limits for Derivatives Retail traders never come near these numbers, but they exist to keep any single speculator from cornering the market.
Opening a Futures Account
A standard stock brokerage account will not trade crude oil futures. You need a commodities account with a broker registered as a Futures Commission Merchant, governed by the Commodity Exchange Act and CFTC oversight.
Identity verification comes first. Federal customer identification rules require the broker to collect your name, date of birth, address, and taxpayer identification number, and verify your identity through government-issued documents.7eCFR. 31 CFR 1023.220 – Customer Identification Programs for Broker-Dealers
After that, each firm runs its own suitability screen. Expect questions about annual income, liquid net worth, trading experience, and your understanding of leverage and margin calls. Many brokers look for annual income above $50,000 and liquid net worth above $100,000 before approving futures trading, though thresholds vary. If a broker decides you lack the cushion or experience to absorb futures losses, the application is denied.
Risks New Oil Buyers Don’t See Coming
Oil carries risks that don’t exist in stocks, and they’ve caught out plenty of people.
Physical Delivery
Every NYMEX WTI contract that isn’t closed or rolled before expiration settles through physical delivery at pipeline and storage facilities in Cushing, Oklahoma.4CME Group. Crude Oil Futures – Contract Specs Hold a long position through the delivery window and you are contractually obligated to take 1,000 barrels. You need pipeline access at Cushing, which you don’t have. Most retail brokers force positions closed before this happens, but the risk depends on your broker’s policies, not the exchange’s.
Prices Can Go Negative
On April 20, 2020, WTI crude oil futures traded below zero for the first time ever. Storage at Cushing was running out, and traders stuck with expiring contracts they couldn’t take delivery on were paying others to take the oil.8U.S. Energy Information Administration. Crude Oil Prices Briefly Traded Below $0 in Spring 2020 Anyone who assumed oil could only fall to zero paid an expensive lesson. When prices go negative, losses can exceed your entire investment.
Contango and Roll Costs
Buy-and-hold ETF investors face a quieter version of the same problem. In contango, each roll costs the fund because it sells the cheaper expiring contract and buys a pricier future one. Held long enough, an oil ETF can lose value even if spot prices are flat or slightly higher. Commodity ETFs suit short tactical trades better than multi-year holds.
How Oil Investments Are Taxed
Taxes depend on the structure of what you buy, and the differences can affect which product makes sense for you.
Futures: the 60/40 Rule
Crude oil futures are Section 1256 contracts. Gains and losses split automatically 60% long-term and 40% short-term regardless of holding period.9Office of the Law Revision Counsel. 26 USC 1256 – Section 1256 Contracts Marked to Market Because the top long-term capital gains rate is lower than the short-term rate, the blended treatment is generally more favorable than short-term stock trading. Report on Form 6781.10Internal Revenue Service. Form 6781 – Gains and Losses From Section 1256 Contracts and Straddles Section 1256 also uses mark-to-market accounting, so open positions are treated as sold at fair market value on the last business day of the tax year. You owe tax on unrealized gains.
Commodity ETFs and the K-1
Funds like USO are limited partnerships, so they send a Schedule K-1 instead of the 1099 that stock ETFs use.11Internal Revenue Service. Instructions for Schedule K-1 (Form 1065) K-1s often arrive in March and can delay your filing. You’re taxed on your share of the partnership’s income whether or not it was distributed to you.
Oil in an IRA
Holding energy partnerships or MLPs inside an IRA can trigger unrelated business taxable income. When UBTI across applicable investments in the account reaches $1,000, the IRA must file Form 990-T and pay tax directly from the account, and the account needs its own Employer Identification Number. Oil company stocks and broad energy-sector ETFs structured as regulated investment companies generally don’t create UBTI, so the wrapper matters.
Why Physical Barrels Aren’t Realistic
If you’re still thinking about owning actual crude, the regulatory picture is where most people stop. Crude oil is a Class 3 hazardous material under the Department of Transportation’s hazardous materials table, UN designation 1267.12eCFR. 49 CFR 172.101 – Purpose and Use of the Hazardous Materials Table Moving it on public roads requires hazmat placards and carriers certified under 49 CFR Parts 171 through 180.13eCFR. 49 CFR Part 171 – General Information, Regulations, and Definitions Civil penalties for improper transport reach $102,348 per violation and $238,809 where the violation causes death, serious injury, or substantial property damage. Willful violations can bring up to five years’ imprisonment.14Federal Register. Revisions to Civil Penalty Amounts, 2025
Storage brings the EPA’s Spill Prevention, Control, and Countermeasure rules under 40 CFR Part 112. Any facility that stores oil and could reasonably discharge it into navigable waters must prepare a written SPCC plan and install secondary containment, often with engineer certification.15eCFR. 40 CFR Part 112 – Oil Pollution Prevention Fire codes cap flammable liquid storage in a room at 25 gallons outside an approved cabinet, and cabinets themselves cap at 60 gallons. A single futures contract calls for 42,000 gallons. Standard homeowner’s insurance excludes pollution claims, and a standalone environmental policy requires a site inspection and commercial containment. Owning physical oil is legal. Doing it legally requires the same infrastructure and permits that industrial operators already have.