The commodities market is slightly different to others. The most important are fundamental aspects, but technical analysis could also play a role. However, while trading commodities a trader has to take into account various aspects, including seasonality or weather.
What’s more, you should also remember that each commodity is governed by its own laws. That means that something that works on the oil market could be useless when applied to wheat or other agricultural commodities. After all one thing could be said – the commodities market is definitely one of the most exciting to trade.
Energy resource is something that can produce heat, move objects, or produce electricity. The energy sector includes corporations that primarily are in the business of producing or supplying energy, such as fossil fuels or renewables.
Types of oil – two oil benchmarks are most commonly traded on the financial markets: Brent and WTI. Nevertheless, there are more types of oil, depending on its properties or the place of its extraction. Price also depends on its properties, location or transport.
Oil stock changes – similar to other assets, the laws of supply and demand make a huge impact on oil prices. When supply exceeds demand, prices fall; the reverse is also true when demand outpaces supply. Therefore, traders are paying close attention to the release of oil stocks data. The two most popular reports are API and EIA. API’s Weekly Statistical Bulletin (WSB) reports total US and regional crude inventories and data related to refinery operations, as well as the production, imports, and inventories of the four other major petroleum products: motor gasoline, kerosene jet fuel, distillate fuel oil, and residual fuel oil. The Energy Information Administration’s (EIA) Crude Oil Inventories measures the weekly change in the number of barrels of commercial crude oil held by US firms.
OPEC is a permanent intergovernmental organization of 13 oil-exporting developing nations that coordinates and unifies the petroleum policies of its Member Countries, namely Algeria, Angola, Congo, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Saudi Arabia, the United Arab Emirates, and Venezuela. OPEC controls almost 80% of the world’s supply of oil reserves. The cartel sets production levels to meet global demand and can influence the price of oil and gas by increasing or decreasing output.
Precious metals are rare, naturally occurring metallic chemical elements of high economic value as gold, silver, palladium and platinum. In the past, they were used as a basis for money, but today they are mainly used by traders to diversify their portfolios and as a hedge against inflation.
Industrial metals are primarily used for construction and industrial purposes and are often more abundant in nature and sometimes easier to mine. Unlike precious metals, base metals tend to tarnish, oxidize, or corrode over time or when exposed to the elements. Examples of industrial metals include copper, steel, aluminum, lead, and zinc.
Agricultural and food products, sometimes called soft commodities, refer to items such as cotton, grains, cattle, and, yes, pork bellies. Agricultural products are among the most valuable commodities and starting material to produce various food constituents. Agricultural productivity is important not only for a country’s balance of trade, but the security and health of its population as well.
Commodities rollovers – most Commodities CFDs are based on future contracts, which means they are subject to monthly or quarterly ‘Rollovers’. The future contracts on Commodities markets normally expire after 1 or 3 months. Therefore, brokers must switch (rollover) CFD price from the old contract to the new futures contract. Sometimes the prices of old and new futures contracts are different, so brokers must perform a Rollover Correction by adding or deducting a one-time only swap credit/charge on the trading account at rollover date to reflect the change in market price. The correction is completely neutral for the net profit on any open position.
Seasonality is the characteristic of a time series in which data are subject to regular and predictable changes that repeat each calendar year. Any predictable fluctuation or pattern that repeats over a period of one year is treated as seasonal. Seasonality may be caused by various factors, such as weather, vacation, and holidays and consists of periodic, repetitive, and generally regular and predictable patterns in the levels of a time series.
Balance sheets or production-demand reports are datasets published by a number of governmental and private institutions which measure supply and demand for given commodity or commodity groups and have the potential to substantially alter market expectations about current and future commodity market conditions and are, therefore, closely watched by market participants. The most popular reports include US Department of Agriculture (USDA) which covers a number of agricultural products and weekly EIA and API releases on US crude oil, gasoline and distillate inventories.