Commodity Market with Reference to Crude Oil
Introduction
Commodity Trading:
Commodity trading is the market activity, which links the producers of the commodities effectively with their commercial consumers. Commodity trading mainly takes place in the commodity markets where raw or primary products are usually exchanged. The raw commodities here are traded on regulated commodities exchanges, in which they are bought and sold in standardized forms of contracts.
Many different factors affect the prices of commodities. This includes taxes, money supply, and inflation. Other factors such as transportation and its costs, Politics, weather and technology and its changes can have an effect as well. If, for instance, you were speculating in gold, you would buy gold biscuits, nuggets if you feel the price would go up in the future and you would wait for some time and sell it when the returns are highest. If it were, the other way round it would be wise to sell it soon before the price further decreases. There is always a buyer and a seller involved in the trading process.
Even though the profits in the case of commodity are quite large, it is quite difficult and is practically impossible to make consistently correct decisions all the time about what and when to buy and sell. Commodities count as extremely lucrative investment opportunities due to their liquidity, as the speculators do not have to hold onto them. However, risk management strategies play an important role for commodity trading.
Size of the market:
The trading of commodities consists of direct physical trading and derivatives trading. Exchange traded commodities have seen an upturn in the volume of trading since the start of the decade. This was largely a result of the growing attraction of commodities as an asset class and a proliferation of investment options which has made it easier to access this market.
The global volume of commodities contracts traded on exchanges increased by a fifth in 2010, and a half since 2008, to around 2.5 billion
Commodity Trading:
Commodity trading is the market activity, which links the producers of the commodities effectively with their commercial consumers. Commodity trading mainly takes place in the commodity markets where raw or primary products are usually exchanged. The raw commodities here are traded on regulated commodities exchanges, in which they are bought and sold in standardized forms of contracts.
Many different factors affect the prices of commodities. This includes taxes, money supply, and inflation. Other factors such as transportation and its costs, Politics, weather and technology and its changes can have an effect as well. If, for instance, you were speculating in gold, you would buy gold biscuits, nuggets if you feel the price would go up in the future and you would wait for some time and sell it when the returns are highest. If it were, the other way round it would be wise to sell it soon before the price further decreases. There is always a buyer and a seller involved in the trading process.
Even though the profits in the case of commodity are quite large, it is quite difficult and is practically impossible to make consistently correct decisions all the time about what and when to buy and sell. Commodities count as extremely lucrative investment opportunities due to their liquidity, as the speculators do not have to hold onto them. However, risk management strategies play an important role for commodity trading.
Size of the market:
The trading of commodities consists of direct physical trading and derivatives trading. Exchange traded commodities have seen an upturn in the volume of trading since the start of the decade. This was largely a result of the growing attraction of commodities as an asset class and a proliferation of investment options which has made it easier to access this market.
The global volume of commodities contracts traded on exchanges increased by a fifth in 2010, and a half since 2008, to around 2.5 billion