Which Direction are the Commodities Markets Heading?

Commodities are raw materials which are extracted from the Earth. There are numerous commodities which are traded on the open markets and through forex brokers as well as retail brokerage firms. There are numerous examples of commodities including: crude oil, coffee, agriculture, wheat, soybeans, corn, copper, cotton etc. Typically, commodities meet the following criteria; they are tradable, deliverable and are liquid. The most widely traded commodities are crude oil, coffee and metals. Commodities prices can change at the drop of a dime. According to several commodities analyst, it is believed that specific commodities products are due for a correction.

Crude oil is an enormous commodities market and the largest in the world. Crude oil is extracted from the ground in many locations around the world. There are several ways to analyse and trade the crude oil market and one of the most common is to evaluate global macro events. Another way to analyse oil is to concentrate on price action within the crude oil market and utilize technical analysis to make the best trading decisions. By using both technical as well as fundamental analysis the forex trader may maximise their opportunities in trading oil.

Crude oil is produced in various areas around the globe. The United States of America recently became one of the largest producers in the crude oil market which has changed the dynamics of the crude oil industry. The United States over the last several years has been heavily involved in Hydro fracking crude oil which has garnered large oil resources from wells which are thought to have a short duration. As long as the demand remains strong for crude oil, additional technologies will continue to be created making the extraction of this commodity even easier.

Presently, there are numerous ways of tracking inventory supply. The information to track inventory supply is available through divisions such as the Department of Energy as well as numerous online resources. Business intelligence is extremely important in the crude oil industry. Business intelligence allows trading firms to have an upper hand on their competitors. Also, because crude oil is one of the most traded commodities, consulting firms will provide information for a fee. In addition, trading organizations will closely monitor the flow of oil that passes through the pipelines to get a firm understanding and future direction of price action within the market.

Another tremendous commodities market is coffee. The largest consumers of coffee are typically developed nations such as the United States, Germany and Italy. The countries which benefit the most from an export position are countries such as Brazil, Vietnam and Colombia. In these countries coffee is a huge source of revenue amounting to close to eighty percent of foreign exchange earnings.

Because coffee is one of the most traded commodities it is traded on major commodities exchanges located in areas such as New York and London. The price of coffee just like other commodities is dictated by supply and demand.

There are two distinct types of coffee traded on the commodities markets which are Arabica and Robusta. Usually, Robusta is sold for seventy percent of the price of Arabica. Robusta is favored by the largest roasting companies which consist of Sara Lee, P&G, Nestle and Kraft. These four roasting companies purchase roughly fifty percent of the coffee produced throughout the world.

In addition to Crude Oil and Coffee one of the most traded commodities in the world are metals. This group of commodities consists of items such as; gold, silver, platinum and copper. Metals are utilized in all industries from construction, fabrication of machines as well as consumer goods. In addition, many metals are used in jewelry. Metal commodities are traded on exchanges such as the London Metal Exchange, COMEX & NYMEX.

Again, there are numerous commodities a trader may include in their portfolio. Recently, commodities products such as crude oil and copper are at a great risk of enormous declines. In addition, to the price of copper plummeting, there is a firm believe that crude oil prices will tumble while investors are looking to exit the market. Several financial institutions believe that the price in oil will fall back to as low as $30 a barrel.

One of the primary reasons that commodities prices may drop so precipitously is that traders as well as investors look to liquidate trades on gain and will do this in unison with other traders and investors. When this happens, the commodities market can suffer major negative consequences.

In the month of January, commodities prices rebounded from a twenty five year low and there is speculation that prices have bottomed out after a loss of eleven percent in the last three months of 2015. Oil as well as copper pricing has recovered from their lows of January and February and there has been a tremendous uptick in all commodities products. In addition, over the last two month of 2016 over twenty billion dollars have flowed into the commodities markets which are the strongest start in commodities since 2011.

In closing, the commodities markets should be closely monitored by traders. Today, there are numerous commodities which are openly traded on the markets through the assistance of online brokers. Some of the most lucrative and potentially rewarding commodities markets are cotton, corn, soybeans, wheat, agriculture and crude oil. . To learn more about the commodities markets and which commodities products are traded most frequently, traders should gather this information directly through their broker.

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